6 Modern Fintech Challenges and How Software Solutions Can Overcome Them

Along with the innovation brought about by technology, many, if not every industry, slowly transition to modernization, including the financial sector. Traditional financial options are gradually progressing to fintech solutions for more streamlined and automated financial services, unlocking potential financial inclusion and granting various market players opportunities to provide monetary facilities. 

“A future-proof business model has three elements in common: customer ownership with embedded digital financial services, an efficient economic model that fosters growth, and tech-enabled innovation and speed.”

McKinsey Global Banking Annual Review

FinTech software for financial businesses

Fintech or Financial Technology is a digital solution for advancing banking and financial facilities. It offers innovative business processes in the finance field and helps business owners and customers to efficiently manage their finances using tech-powered apps and tools. Many banks, large retailers, telecoms, and wallet operators start implementing FinTech software solutions to digitize their financial services. Digital financial sevices gain much traction among end users, namely bank customers, shoppers, and other service consumers. When integrated by an experienced Fintech vendor, these digital financial services can bring businesses much value when it comes to attracting and engaging customers, and increasing revenue streams through added service offerings.

Mobile phone users are a good source of new profit growth for financial businesses if they are ready to implement FinTech software solutions. Mobile banking, digital wallet platforms, online in-app payments, insurance, and cloud cusomer rewards programs are only a few of the fintech software solutions. Being new to the financial industry, it has raised hesitations especially that it will contend against the traditional way of banking and wealth management. However, the tables have turned, and it has become a staple for most mobile users, aiming for convenience and accessibility. 

The covid-19 pandemic has amplified the need for cashless transactions with the launch of e-wallets or mobile wallets in some locations. It is slowly making its name in the financial industry as a form of digital currency, making fintech software the most sought-after financial service for sending money overseas and mode of payment to consumers and business owners.

Fintech companies continue to grow, gaining financial institutions’ interest resulting in partnerships and mergers. Since we are slowly turning into the digital era, financial companies need to adhere to the changes and adapt these services to stay on the surface. 

Surveys say that 77% of financial institutions gear towards innovation to increase customer loyalty. Consumers are encouraged to stay committed to the tool with its convenience and ease of use, secure, intrinsic designs, and leading-edge technology.  

However, as it continuously improves, there are a few challenges Fintech industries are facing. Here’s a break-down list that might help banks, retailers, and wallet operators understand what risks they should consider while partnering with a FinTech service provider. On the other hand, newcomers to the FinTech industry can get to know what issues they should avoid to provide perfect digital financial services to their clients.

1. Data Security

Network security has been an issue for many industries and not only for Fintech companies. Battling cybersecurity, especially for the Fintech industry, is an expensive ordeal where banks and financial market firms spend massive amounts on securing Fintech applications. 

Once a hacker manages to penetrate the security of a Fintech, large volumes of personal and financial information of users and even employees are susceptible to risk of fraud and data grabbing. In an article published by Insurance Information Institute, 47% of Americans have encountered financial data theft in 2020 according to Aite-Novarica Group. And to make the issue even worse, most companies can only discern attacks probably too late with serious detrimental effects.

You can overcome data security threats by investing in making their applications reliable and safe against potential hazards. Invest in dependable software developers who offer cutting-edge techniques and eloquent strategies to secure data. Security modes like data encryption, tokenization, One-Time Passwords (OTP), regular password reset, and short log-in sessions are only a few ways to secure Fintech solutions.

2. Acquiring Loyal Customers

Since Fintech companies are considered new to the industry, their target audience and strategies are not yet determined. Therefore, compelling the right customers can be challenging at first. 

To address this issue, fintech solution providers should arbitrate their niche and leverage it to get ahead of the competitors. Businesses should enhance their strategies by investing in automation tools to better serve customers. 

The business world is a big competition, and you must offer something remarkable to stand out. A compelling and engaging advertising and marketing strategy can help to augment your brand and build up popularity. 

Customer Acquisition tools are valuable to attract new customers, generating more revenue for the fintech company. These tools feature ready-to-use templates for creating campaigns for your business. 

3. Regulatory Compliance

The finance industry is one of the most regulated sectors since it involves investments and crucial information. As the technology is slowly penetrating the financial operations, regulations for this process also emerge. 

Financial institutions use these regulatory guidelines to protect them from fraudulent acts. There will always be an intervention from the government for the regulated sectors. 

Before utilizing the software, it is essential to check the fintech solution provider’s legal compliance. You can also seek legal help to educate you on the government guidelines and details. Seek a regulatory compliance software that aids financial institutions in complying with the directive set by the government.  

4. Keep Pace With The Technology

As businesses gear toward digital transformation, these initiatives will produce lucrative earnings in the future. Fintech plays a vital role in business management to keep up with the modern transition necessary to survive in this fast-paced economy. 

However, it will be difficult for fintech solutions to invade financial firms and implement these innovations. Integrating the latest technologies into the existing systems will not be easy and will require tedious training, effort, time, and money. 

Financial entities need to adapt to the challenges and adjust to the changes brought about by technology for the business to thrive. Hiring experts from this field can assist transitioning companies as they embrace the changes to accommodate Fintech solutions for financing. 

5. Attracting Investors

Fintech is a growing industry and slowly making its name in the financial sector. Investors are attaining interest in funding these businesses; however, finding the right venture capitalist is not as easy as it seems. 

Proposing a solution for the current issues fintech is facing is the typical way to attract investors for funding. Like any other start-up business, presenting a concrete financial plan and business model is one way to get ahead of your competitors. Show results of how your company’s business plan will work, and its potential to generate revenue.

There may be times that getting an investor to fund your fintech business venture seems challenging. Consider building your equity by determining the assets and liabilities of your company by using fintech solutions for financing like an accounting software. There are examples of small business accounting software that can help you to calculate the debts, payables, and receivables, cash flow, including inventories and salaries. Different types of accounting tools are available to cater to your specific needs, so it’s always crucial to determine what fits your needs best.

6. Competition Among Banks and Other Companies

Some people, especially those who belong to the older age bracket, prefer doing business in a brick-and-mortar bank. People from this age are not that savvy regarding technology and would like it better to receive personal service from bank personnel. Even well-known tech and e-commerce companies are starting to launch their financial products, competing against fintech companies. 

Your fintech company should offer convenience and a quick account opening feature to get ahead of your competitors. People are naturally impatient and want to get things done instantly. Having an app that is user-friendly and lets consumers sign up in just a few clicks will be an advantage. 

Another bargaining chip for fintech companies is to have a lower transaction charge for banks and other fintech solutions. Leverage the convenience, ease of use, and lower fees to draw interest from potential users. 

Dominate the competition by offering a one-stop-shop solution for your users. This way, the consumers will no longer need another app to manage their finances since they can find a variety of partner merchants and payment gateways to choose from. 

Things fintechs and banks should know: Final thought

Since Fintech companies are involved with people’s money and personal data, many challenges go along, such as restricting bodies and other concerns, making it hard for fintech software solutions to infiltrate the finance industry. However, it holds true largely for fintech startups as experienced companies perfectly know how to avoid the risks while delivering digital financial services to banks and other clients.

• In any internet-powered app, chances are that the data will be compromised. Secure your users’ personal information by utilizing state-of-the-art security features. 

• Your fintech company should have a reliable app that helps users manage their finances, wherever the user is. Develop an app that integrates with other fintech solutions, financial institutions, and payment channels. 

Financial services technology will continue to boom in the coming years as financial entities aim to mitigate the risks of human errors, reduce costs by using AI and automation, and increase working efficiency. Financial entities need to keep up with the trend to prevent being left out and keep the business going. Technology is here to stay, and all we can do is embrace it to avoid becoming obsolete. Adaptation to digital transformation and systems upgrades is one way to keep up with the changes brought by technology.

With this, however, the FinTech software vendors and service providers should have enough expertise in implementing digital financial solutions. FinTech vendor credibility is what makes you stay safe from all the risks and challenges mentioned above. It is highly recommened to deal with mature fintechs that have extensive international portfolio of live projects.

Depending on your specific business requirements, you may like to know about vendor’s current eWallets, card tokenization, customer loyalty solutions, or any other software development services and products you are going to integrate. So should your business need going digital, contact Wallet Factory to see how FinTech services can boost your revenue stream and enhance customer retention and loyalty.