Changes in Fintech: The 4 biggest challenges
As the fintech industry paves the way towards financial inclusion, its digital breakthroughs have made it clear that money management, whether at the individual or institutional level, is changing.
As financial technology advances, business processes begin to be automated and services expand at an incredible speed.
However, expansion and consolidation are not always the same, and there are still some challenges that remain to be tackled by the industry.
We narrowed them down to 4, so read on to find out what’s hindering fintech’s growth, what are the main issues businesses are struggling with, and where it can all go from here.
Fintech and data security
Handling sensitive data securely can present itself as a real challenge for fintechs.
System and Internet vulnerabilities are very real problems that can directly affect both customers’ money and their personal data.
The shift from the good old bank vault to mobile banking has made it clear that security must also be taken to a completely new level.
Data breaches, system vulnerabilities and cyber attacks have become a newfound reality that fintechs must take seriously.
Consequently, modern problems require modern solutions, and the future of financial technology companies seems to be tied to security features such as:
· Data obfuscation
· Data encryption
· Biometric identification
· Behavior analysis
· Two-factor authorization and real-time notifications
Fintech and compliance
Regulation puts fintechs in check and the financial industry is regulated like no other.
Consequently, in terms of regulation, fintechs can expect two types of disruption to their activities:
· Government: it goes without saying that government regulatory frameworks will always exist, but with new technologies such as blockchain, fintechs should anticipate interference. In fact, they might argue that they should be the ones setting the agenda in that regard, rather than waiting for a poorly worded framework to be legislated.
· Online: fintechs are also dependent on major search engines such as Google and to be removed from search results, for example, would be disastrous. As such, following online best practices also becomes crucial, not just for compliance factors alone, but to create a safer environment for all participants.
These two factors alone require fintechs to be on top of their game with their compliance and legal departments, as it is critical to stay up-to-date on the regulations of their countries of operation.
Fintech and Blockchain
Blockchain has become a buzzword and despite its growing popularity and obvious upside, some still don’t see it as a viable solution for their business.
Also, circling back to regulations, given its almost nascent status, implementation of a blockchain must be done carefully.
And while we see blockchain being prevalent in the future of finance, between banks and fintechs, blockchain implementation can still move at two completely different paces.
The shift from legacy systems to the blockchain may still depend on tackling at least 4 things:
· Consumer confidence
· Interoperability
· Transaction costs
· Performance issues
Fintechs, big data and personalization of services
AI will most likely reshape the way the financial world works, based on how banks collect data.
Whether it’s their clients’ financial behavior or their habits, data has become essential as it goes far beyond profiling users by helping manage transactions and even combat fraud.
However, this shift requires a thorough integration and change in processes, which is not always easy due to a number of technical factors, but also due to personal factors (eg: customer consent).
Machine learning and AI require the ability to capture incredible amounts of data, but also the capacity to process it, which means the capital requirements can also be significant. Fortunately, there are solutions on a smaller scale in the form of learning models with tighter parameters.
Nevertheless, personalization of services will increasingly depend on how detailed fintechs and bank customer insights are.
Knowing a user’s behavior, their socio-economic status, their social connections and many other elements is the key to delivering tailored solutions at the right time and through the right channel.
This insight, when delivered with the right user experience (UX/UI), will surely correlate with greater user retention.
Last word
Fintech VS traditional banking has always been an interesting topic.
And while the former tends to pioneer and present disruptive technologies, the latter absorbs relevant functions after careful consideration.
Perhaps one can learn from the other as revolutionary technology is sorely needed in traditional banking and regulatory prudence and procedural foresight is needed in the fintech world.
As the fintech industry paves the way towards financial inclusion, its digital breakthroughs have made it clear that money management, whether at the individual or institutional level, is changing.
As financial technology advances, business processes begin to be automated and services expand at an incredible speed.
However, expansion and consolidation are not always the same, and there are still some challenges that remain to be tackled by the industry.
We narrowed them down to 4, so read on to find out what’s hindering fintech’s growth, what are the main issues businesses are struggling with, and where it can all go from here.
Fintech and data security
Handling sensitive data securely can present itself as a real challenge for fintechs.
System and Internet vulnerabilities are very real problems that can directly affect both customers’ money and their personal data.
The shift from the good old bank vault to mobile banking has made it clear that security must also be taken to a completely new level.
Data breaches, system vulnerabilities and cyber attacks have become a newfound reality that fintechs must take seriously.
Consequently, modern problems require modern solutions, and the future of financial technology companies seems to be tied to security features such as:
· Data obfuscation
· Data encryption
· Biometric identification
· Behavior analysis
· Two-factor authorization and real-time notifications
Fintech and compliance
Regulation puts fintechs in check and the financial industry is regulated like no other.
Consequently, in terms of regulation, fintechs can expect two types of disruption to their activities:
· Government: it goes without saying that government regulatory frameworks will always exist, but with new technologies such as blockchain, fintechs should anticipate interference. In fact, they might argue that they should be the ones setting the agenda in that regard, rather than waiting for a poorly worded framework to be legislated.
· Online: fintechs are also dependent on major search engines such as Google and to be removed from search results, for example, would be disastrous. As such, following online best practices also becomes crucial, not just for compliance factors alone, but to create a safer environment for all participants.
These two factors alone require fintechs to be on top of their game with their compliance and legal departments, as it is critical to stay up-to-date on the regulations of their countries of operation.
Fintech and Blockchain
Blockchain has become a buzzword and despite its growing popularity and obvious upside, some still don’t see it as a viable solution for their business.
Also, circling back to regulations, given its almost nascent status, implementation of a blockchain must be done carefully.
And while we see blockchain being prevalent in the future of finance, between banks and fintechs, blockchain implementation can still move at two completely different paces.
The shift from legacy systems to the blockchain may still depend on tackling at least 4 things:
· Consumer confidence
· Interoperability
· Transaction costs
· Performance issues
Fintechs, big data and personalization of services
AI will most likely reshape the way the financial world works, based on how banks collect data.
Whether it’s their clients’ financial behavior or their habits, data has become essential as it goes far beyond profiling users by helping manage transactions and even combat fraud.
However, this shift requires a thorough integration and change in processes, which is not always easy due to a number of technical factors, but also due to personal factors (eg: customer consent).
Machine learning and AI require the ability to capture incredible amounts of data, but also the capacity to process it, which means the capital requirements can also be significant. Fortunately, there are solutions on a smaller scale in the form of learning models with tighter parameters.
Nevertheless, personalization of services will increasingly depend on how detailed fintechs and bank customer insights are.
Knowing a user’s behavior, their socio-economic status, their social connections and many other elements is the key to delivering tailored solutions at the right time and through the right channel.
This insight, when delivered with the right user experience (UX/UI), will surely correlate with greater user retention.
Last word
Fintech VS traditional banking has always been an interesting topic.
And while the former tends to pioneer and present disruptive technologies, the latter absorbs relevant functions after careful consideration.
Perhaps one can learn from the other as revolutionary technology is sorely needed in traditional banking and regulatory prudence and procedural foresight is needed in the fintech world.
