Fintech has significantly altered many business sectors in recent years, especially the financial sector. Numerous financial aspects, including lending money, processing payments, insurance, and other areas, have improved. Customers now have a seamless and distinctive experience that makes it easier for them to understand and adopt fintech. However, most clients continue to favor more established financial institutions. Fintech is undergoing a technological revolution, but it still faces some problems and obstacles. Lack of trust, transparency, security flaws and particular customer behaviors are some of the biggest fintech industry challenges. We will examine these issues in-depth in this article and attempt to come up with solutions.
What Is Fintech?
Financial technologies (Fintech) were developed to either replace or supplement traditional economic methods. Software, algorithms, processes, and business models are examples of these. Personal investments, trading, banking services, and insurance are all significant areas of almost any Fintech app. Although technological advancements and innovations continue to propel the financial transformation forward, fintech companies face a unique set of risks and exposures that may differ from those faced by traditional financial institutions. We’ve compiled a list of the top five fintech business risks to be aware of and to manage it.
1. Data Security
Whether it’s mobile banking, payment apps, or Fintech, data security has emerged as one of the top issues in the online world. As we all know, traditional banking systems are confident in their ability to keep their data safe and secure with security guards, CCTVs, vaults, and heavy bulletproof doors. However, things are not as simple as we might think when it comes to virtual security. Users may be more affected by vulnerabilities because not only their money but also their data is at risk, which makes them much more covert and potentially more damaging.
The Solution
The assistance of a Fintech app development company will help you create a high-level security app. To boost security, the app could have the following components:
- Authorization via two factors
- Authentication using biometrics
- Data obfuscation and encryption
- Real-time notifications and alerts
- Behavioral research
2. Inadequate Mobile And Technological Expertise
Some banks or finance companies in the fintech sector need more adequate or practical mobile banking services. Although some banks attempt to mimic websites, nobody would choose a mobile application in today’s digital world. Every user seeks a simple and practical option. Therefore, a lack of fintech mobile app development expertise leads to unfriendly applications that don’t make the best use of mobile devices. NFC chips, geolocation capabilities, fingerprint unlocking, and other features, for instance, might not be useful to apps. These features and technologies enable a fintech bank to provide incredible customer experiences.
The Solution
Your mobile device needs to have the following capabilities for users to use fintech app development services:
- Payments via QR-code for public transportation
- Shops with NFC chips
- Automatic lens-based credit card number scanning
- Finger-print two-factor authentication
The hardware of the devices can be fully integrated to accomplish this.
3. Big Data and AI Integration
According to 79% of bankers worldwide and 82% of US bankers, AI has transformed Fintech such as the way banks collect data and communicate with customers. Big data and artificial intelligence, as we all know, affect every organization. Organizations can gather personal data about users, from social status to financial behavior, habits, and in-app activity, using big data. This data is essential for banks, particularly when it comes to offering high-risk banking services and credit ratings. Big data enables AI to fully automate the process of identifying fraud, conducting a risk analysis, and efficiently managing transactions. Fintech companies must overcome several obstacles to using these technologies, though. They need knowledge and ongoing upkeep. It will be challenging to incorporate the most recent technologies into an established system if you already work in the banking sector. In addition to technical adjustments, putting this into practice will require you and your customers to adapt as well as reshape your business.
The Solution
Machine learning will be used to teach AI to combine it with big data. You will require a large amount of data to train your system for this. The majority of banking apps can’t process and fetch many different data sets. Therefore, by using a one-shot learning model that enables you to train your machine learning system on smaller amounts of data, you can solve this problem.
4. Blockchain Integration
Numerous fintech applications incorporate blockchain technology. While some businesses don’t think blockchain is a workable solution, others see it as a way to improve data exchange. By implementing a blockchain, you can increase the credibility of the Fintech sector. Because it enables you to monitor and analyze each transaction stage and stop any changes from occurring so that you can always keep an eye on it. For many financial organizations, integrating a blockchain is a difficult task. Banks and other financial institutions have so far been slow to embrace the blockchain craze. Fintech startups, however, are more likely to try to upend the industry. They should take into account the fact that conventional banks and governments continue to be wary of new technologies.
The Solution
As we all know, incorporating blockchain technology is not easy. Make sure to follow all government guidelines and laws when implementing this. Furthermore, avoid any government restrictions on your mobile services because governments are still hesitant to allow widespread blockchain adoption.
5. Government Regulation Compliance
One of the most regulated industries is finance. Even if you use conventional Fintech software that omits blockchain and other essential technologies, there will always be government interference.
The Solution
Make sure to verify that the software is compliant with the law before using it or developing an application. Additionally, if necessary, you can hire a legal consultant to walk you through all the fundamental guidelines and policies. Make sure your legal department is aware of the most recent government regulations before you enter the market so you can make the necessary changes right away.
Wrapping Up
We still have a lot of obstacles to overcome in the fintech sector, though. For fintech companies, regulations and various government policies present difficulties. To disrupt the financial sector, we must, however, always strike a balance between the adoption of new technologies and adherence to the established order. New trends and technologies are difficult for traditional banking to adopt, though. Since they have a positive impact on people’s lives and make banking more convenient, I think mobile technologies will eventually be used in the financial sector even more frequently.