As the fintech industry paves the way for financial inclusion, its digital breakthroughs reveal how money management at the individual or institutional level is changing.
As financial technology evolves, business processes are beginning to be automated and services are expanding at breakneck speed.
However, scaling and integration is not always easy and there are still some challenges the industry must address.
We’ve narrowed them down to four, so read on to find out what’s holding back fintech growth, what are the main issues companies are struggling with, and where we can go from here.
Fintech and data security
Handling sensitive data in a secure manner can be a real challenge for fintechs.
System and Internet vulnerabilities are a very real problem and can directly affect both your client’s money and personal data.
The move from good old bank vaults to mobile banking has made it clear that security needs to be taken to a whole new level.
Data breaches, system vulnerabilities, and cyber-attacks are the new realities that Fintech needs to seriously address.
Modern problems therefore require modern solutions, and the future of financial technology companies seems to be tied to security features such as:
- Data obfuscation
- data encryption
- biometric authentication
- behavior analysis
- Two-factor authentication and real-time notifications
Fintech and compliance
Regulation holds back fintech, and the financial industry is regulated like no other.
Therefore, when it comes to regulation, fintechs can expect two kinds of interference in their activities.
- Governments: Needless to say, government regulatory frameworks will always exist, but with new technologies such as blockchain, fintechs should expect interference. Indeed, some might argue that rather than waiting for a poorly formulated framework to become law, we should be the ones to set the agenda on that point.
- Online: Fintech companies also rely on big search engines such as Google, and being excluded from search results, for example, would be devastating. As such, adhering to online best practices becomes essential not only for compliance factors, but also for creating a safer environment for all participants.
These two factors alone require fintechs to be at the top of their game with compliance officers and legal departments. This is because it is important to have up-to-date information on regulations in the countries in which you operate.
Fintech and blockchain
Blockchain has become a buzzword, and despite its growing popularity and obvious benefits, some people still do not see it as a viable solution for their business.
Furthermore, coming back to regulation, blockchain implementation is still in its infancy and should be done with great care.
And while blockchain is certainly ubiquitous among banks and fintechs in the future of finance, blockchain implementation may still be moving at two completely different paces.
Transitioning from legacy systems to blockchain may still rely on addressing at least four things.
- consumer confidence
- interoperability
- transaction cost
- performance issues
Fintech, big data, personalization of services
AI will most likely reshape how the financial industry operates based on how banks collect data.
Whether it’s a client’s financial behavior or habits, data has gone far beyond profiling users by helping manage transactions and combat fraud.
However, this transition requires a complete integration and change of processes, which is not always easy due to many technical as well as personal factors (such as customer consent).
Machine learning and AI require not only the ability to capture incredible amounts of data, but also the ability to process it. That means capital requirements can be significant. Fortunately, small-scale solutions can be found in the form of learning models with more stringent parameters.
That said, service personalization will increasingly rely on detailed insights of fintech and banking customers.
Knowing user behavior, socioeconomic status, social connections, and many other factors is key to delivering customized solutions at the right time and through the right channels.
These insights certainly correlate with improved user retention when delivered with the right user experience (UX/UI).
The last word
Fintechs VS traditional banking has always been an interesting subject.
And while the former tend to pioneer and present disruptive technologies, the latter absorb relevant features after careful consideration.
Perhaps one can learn from the other, as traditional banking requires a great deal of innovative technology, and fintech requires regulatory prudence and process foresight.
As the fintech industry paves the way for financial inclusion, its digital breakthroughs reveal how money management at the individual or institutional level is changing.
As financial technology evolves, business processes are beginning to be automated and services are expanding at breakneck speed.
However, scaling and integration is not always easy and there are still some challenges the industry must address.
We’ve narrowed them down to four, so read on to find out what’s holding back fintech growth, what are the main issues companies are struggling with, and where we can go from here.
Fintech and data security
Handling sensitive data in a secure manner can be a real challenge for fintechs.
System and Internet vulnerabilities are a very real problem and can directly affect both your client’s money and personal data.
The move from good old bank vaults to mobile banking has made it clear that security needs to be taken to a whole new level.
Data breaches, system vulnerabilities, and cyber-attacks are the new realities that Fintech needs to seriously address.
Modern problems therefore require modern solutions, and the future of financial technology companies seems to be tied to security features such as:
- Data obfuscation
- data encryption
- biometric authentication
- behavior analysis
- Two-factor authentication and real-time notifications
Fintech and compliance
Regulation holds back fintech, and the financial industry is regulated like no other.
Therefore, when it comes to regulation, fintechs can expect two kinds of interference in their activities.
- Governments: Needless to say, government regulatory frameworks will always exist, but with new technologies such as blockchain, fintechs should expect interference. Indeed, some might argue that rather than waiting for a poorly formulated framework to become law, we should be the ones to set the agenda at that point.
- Online: Fintech companies also rely on big search engines such as Google, and being excluded from search results, for example, would be devastating. As such, adhering to online best practices becomes essential not only for compliance factors, but also for creating a safer environment for all participants.
These two factors alone require fintechs to be at the top of their game with compliance officers and legal departments. This is because it is important to have up-to-date information on regulations in the countries in which you operate.
Fintech and blockchain
Blockchain has become a buzzword, and despite its growing popularity and obvious benefits, some people still do not see it as a viable solution for their business.
Furthermore, coming back to regulation, blockchain implementation is still in its infancy and should be done with great care.
And while blockchain is certainly ubiquitous among banks and fintechs in the future of finance, blockchain implementation may still be moving at two completely different paces.
Transitioning from legacy systems to blockchain may still rely on addressing at least four things.
- consumer confidence
- interoperability
- transaction cost
- performance issues
Fintech, big data, personalization of services
AI will most likely reshape how the financial industry operates based on how banks collect data.
Whether it’s a client’s financial behavior or habits, data has gone far beyond profiling users by helping manage transactions and combat fraud.
However, this transition requires a complete integration and change of processes, which is not always easy due to many technical as well as personal factors (such as customer consent).
Machine learning and AI require not only the ability to capture incredible amounts of data, but also the ability to process it. That means capital requirements can be significant. Fortunately, small-scale solutions can be found in the form of learning models with more stringent parameters.
That said, service personalization will increasingly rely on detailed insights of fintech and banking customers.
Knowing user behavior, socioeconomic status, social connections, and many other factors is key to delivering customized solutions at the right time and through the right channels.
These insights certainly correlate with improved user retention when delivered with the right user experience (UX/UI).
The last word
Fintechs VS traditional banking has always been an interesting subject.
And while the former tend to pioneer and present disruptive technologies, the latter absorb relevant features after careful consideration.
Perhaps one can learn from the other, as traditional banking requires a great deal of innovative technology, and fintech requires regulatory prudence and process foresight.