Key Challenges The FinTech Industry Is Facing In 2021

Published on 12 Oct 2021

Digital developments and trends in financial technology, or the Fintech industry, are reshaping how individuals, financial institutions, and banks handle their money. Modern developments have dramatically altered how individuals interact with their finances in the previous five years. Fintech firms are on a road to expand and establish a reputation in the sector. Financial technology involves enhancing and automating business processes and services. However, these obstacles stretch our imaginations in new directions and foster exceptional growth, but there is always space for improvement.

According to Market Screener, the FinTech market will be valued $26.5 trillion by 2022, increasing at a CAGR of 6%. The true cause for this development is the increased demand for loans and insurance, as well as increased interest in investments.

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However, this growth doesn’t come without its fair share of challenges. In this blog, we’ve covered all the main challenges the Fintech industry is facing, along with solutions that can help companies bridge the gap.

1) Data Protection

Data security has emerged as a key problem in the Internet age, whether it is in the context of mobile banking, payment applications, or Fintech in general. Traditional banking systems, as we all know, rely on security guards, CCTVs, vaults, and massive bulletproof doors to keep their data safe and secure. However, when it comes to virtual security, things are not as simple as they appear. Vulnerabilities are considerably more subtle and have the potential to have a greater impact on consumers, as not only their money, but also their personal data, is at stake.

Solution

With the assistance of a Fintech app development firm, you may create a high-level security app. To increase its security, the app may have the following features:

  • Authorization with two factors
  • Authentication through biometrics
  • Encryption and obfuscation of data
  • Notifications and alerts in real time

2) Integration of Big Data and AI

According to Accenture, 82% of US bankers and 79% of worldwide bankers believe AI will change the way banks acquire information and engage with clients. Big data and artificial intelligence are two technologies that are required for any modern banking software. Big data enables companies to collect and organise information about a user, including their identity, family members, and social standing, as well as their financial behaviour, habits, and in-app activity.

All of this information is critical to a bank, particularly when it comes to credit ratings and other high-risk banking services. When used with big data, AI can assist you in automatically detecting fraud, doing risk analyses, and successfully managing transactions.

However, these technologies are difficult to adopt since they need excellent technical expertise and ongoing maintenance.

If you currently have a banking firm, integrating your present system with new high-end technology will be difficult. This will necessitate not only technological changes, but also a reshaping of your business and adaptability from you, your staff, and your users.

Solution

The ideal answer is to employ a big data and artificial intelligence specialist and enable them to study your business from the ground up in order to assess your needs and how to satisfy them using industry best practises. Since financial systems are complicated, just integrating AI systems via APIs will not enough.

To make AI and big data operate together, machine learning must be able to train AI. You'll need a lot of data to train your system for this. Most financial apps are incapable of processing, let alone gathering, such massive amounts of data. This difficulty may be solved by employing a one-shot learning model, which allows you to train your machine learning system on fewer amounts of data.

3) Lack of Mobile and Technological Expertise

Some financial businesses or banks in the fintech industry lack adequate or convenient mobile banking services. While some banks have attempted to provide well-made websites to their users, mobile applications are far from the expected norm. Every user desires a simple and straightforward method of operation.

As a result, a lack of experience in fintech mobile app development services results in unfriendly apps that do not make full advantage of mobile devices. Apps may not benefit from NFC chips, geolocation capabilities, fingerprint unlocking, and other features, for example. Using these features and technology, a fintech bank may provide incredible experiences.

Solution

To provide consumers with fintech app development services, your mobile device must have the following features:

  • Payment with a QR code in public transportation
  • In-store NFC chip
  • A credit card number is automatically scanned using a lense
  • Fingerprint authentication as a second factor
  • This may be accomplished by fully integrating with device hardware

4) User Retention and Satisfaction

User experience and retention are two of the most important considerations when developing a banking app. A FinTech app should strike a balance between user experience and security: for example, you should ensure that access to a mobile banking application is neither too simple nor too difficult.

Your app's design should also be user-friendly and adhere to current UI/UX design trends.

Solutions

Make certain that your UI/UX choices are both safe and user-friendly. Users will not mind two-factor authentication, but requiring them to check in with their user ID and password each time they open the app is excessive.

Your software should strike a balance between usability and security. Conduct a competitive study and don't forget to look at FinTech apps from other countries: you could come across an innovative UI or UX solution.

5) Effective Marketing Strategies for Customer Acquisition

In general, fintech companies do not fully understand their niche, target audience, or strategy. In recent times, since the majority of people still utilise traditional banking services, Fintech businesses have struggled to overcome this obstacle.

Solution

To improve your business and tactics, you must ensure that you are much more preferable than your competition. And to do so, you must either invest a lot of money, time, and human resources to provide seamless services to your clients, or you must work with traditional banks.

Offering the finest product is not what your customers expect in this competitive environment. You must endorse yourself by telling them about your accomplishment. Furthermore, you must develop a powerful and successful marketing plan that includes advertising, partnership, and so on. This will not only help you acquire popularity, but it will also help you increase brand recognition.

Conclusion

Although conventional banking is still hesitant to adopt new technologies, mobile technologies will become increasingly widespread in the financial industry since they are beneficial and handy for individuals while also assisting banks and other organizations in operating more effectively.

In the FinTech business, however, there are still obstacles to overcome. Regulations and a lack of confidence from the government make it difficult for FinTech businesses to disrupt the financial industry, and in order to disrupt the financial sector, one must strike a balance between new technology and compliance with the existing system.

It is critical to offer security on a continuous basis, to scan your program for vulnerabilities, and to keep it up to date. However, keep consumers in mind and provide them with the greatest experience possible.

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