The rise of the fintech industry and its associated challenges
The Fintech industry has generated significant changes, disrupting many industries, particularly the financial sector. Fintech has created several benefits in finance, improving payments processing, insurance and money lending. The rise of fintech has provided a unique customer experience and enabled people to embrace the transition to fintech.
The majority of fintech customers tend to be choosing traditional financial institutions as there are several challenges that fintech needs to tackle to continue this technological revolution. Some of the main areas to focus on relating to trust, transparency, security and customer trends.
Security and User Privacy
Across Europe, the use of financial technology increased by over 70% during 2020, supported by considerable investments into fintech. A rise like this comes with new challenges, one of which is developing new security concerns. Cybersecurity cases are rising, and unfortunately, fintech businesses are a prime target for cyberattacks. The fintech industry holds significant valuable information that needs to be protected.
Maintaining a grasp of new technology
According to a recent survey by Gartner, over 50% of financial services CIOs believe that most businesses will work with digital technology and that these channels will yield higher revenue and value. This statement emphasises the importance of fintech on the future of business performance.
Businesses that rely on traditional management systems will not keep the competitive edge needed to maintain momentum with the shift towards digital technologies. Many companies consider the transition to digital as a necessity rather than just being a good idea.
Emerging technologies such as cloud computing, AI, ML and big data offer several benefits for businesses looking to reduce overheads. They also provide the potential to improve the overall user experience. The move to these technologies, however, does come with initial costs and some risks.
AI provides a considerable competitive advantage by creating deeper insights into customer behaviours, enabling financial businesses to assign the right product to the right customer at the right time.
The Quality of Software
Finance businesses that apply the latest business technology create an advantage in the journey towards digital. The ability of new cloud technologies depends on flexibility and scalability. Having flexibility means cloud technology can enable systems to evolve alongside a business. Successful fintech businesses are dependent on reliable IT technology resources.
Regulatory compliance has become a challenge within the finance sector due mainly to the rise in regulatory fees attached to earnings and credit losses. There is a growing number of regulations that financial businesses must comply with, and compliance can present added pressures on resources.
The future of the fintech industry is relatively clear. Financial technology is going to have a significant influence on the finance industry. Developing a functional financial solution will require considering all of the challenges mentioned.