Fintech Challenges and Opportunities

Last updated on June 23rd, 2022 at 04:30 am

We have come a long way due to technology. Right from the steam engine that helped transform manufacturing and transportation, to computing and the internet that drastically transformed the exchange of information. All of these technologies have empowered innovations that have solved ample of problems and improved our quality of life. Now, we are in the middle of a shift from the internet economy to a Digital Consumer Economy.

IT and financial systems have continued to advance while maintaining a close relationship to each other. Financial technology (Fintech) is used to describe new tech in financial services that seek to improve and automate its delivery and use.

The digitalization of financial transactions using FinTech solutions enables low-cost fundraising, account settlement, and collection by connecting capital providers and users directly.

Let us take a look at some upcoming challenges this industry faces

Challenges in Fintech:

Having access to a limited source of funds is one of the greatest challenges for FinTech companies. They need to convince the venture capitalist for their innovative ideas. The funds and capital play a major role to succeed in the business. The funds restrict their ability to innovative products and ideas and incorporate innovative and expensive technologies in their operations. Further making it difficult to market and spread awareness about their products.

For FinTech startups, it is really important to hire a capable person or team that would understand and study all the regulations and laws. Ensuring compliance to the regulatory bodies as well as analyze the impact of certain law on your product or service or the way it can shape the product market is essential. This is a challenge for fintech startups as the law and regulations differ from country to country.

FinTech companies need to be on their feet and keep an eye on the upcoming tech to stay relevant. They not only compete with the giants such as Paypal, Citi, and Goldman Sachs but also with the new entrants in the financial domain with an established brand such as Amazon. They need to put their best foot forward to differentiate their products and services from others and target the untapped market.

Without early profit, the business would be unable to bear fruit for a longer period of time. Venture capitalists, as well as funds providers, reviews the performance of startups in initial stages to decide upon the funding status, such a situation is challenging to keep going without early profits.

Data security is the utmost priority as FinTech firms have access to personal and confidential information such as credit card numbers, income, net worth, social security number and more. The company can incur a huge loss in the form of negative reputation, legal fines and potential liabilities due to lawsuits if it fails to detect the data breach or cyber-security threat.

With the ample of frauds and threats in the market, it can be challenging to build up the credibility of the company. People today are more suspicious with the disruptive technology used by fintech firms. It is a challenge for firms to erase their potential customers’ suspicions and build trust.

While we now already know about the challenges, let’s take a look at the brighter side for a while.

Opportunities in FinTech

FinTech in the banking and financial sector normally offer their services in the form of products, applications, business processes as well as models. FinTechs today are focusing on enhancing platforms by traditional banks and financial institutions to build innovative business models. The application and products developed have advanced integration capabilities, allowing the customers to directly partner with merchant vendors and removing third party channels leading to cost-cutting and better customer experience.

Fintechs can use robotic process automation to address key pressure points, mitigate risks and reduce costs. Robots are powered by emotional intelligence, logical reasoning, natural language processing, navigation, sensors, etc. that enable them to sense and respond to the details of the environment like a real bank teller. This involves tasks such as risk assessments, customer onboarding, verification, security checks, data analysis and reporting, administrative activities, and many more. Over time, these robots will be able to perform more complex tasks, making financial processes more efficient and seamless.

Since FinTechs are lean, agile and innovative, startups don’t have to worry about any legacy architecture as they rely on leading-edge technology. They require highly skilled yet fewer staff. FinTech fulfil customer expectations using agile processes and greater customer orientation and accelerating their speed of innovation. They come up with easy to use mobile and online user journeys with intuitive features making the users’ life easy.

Every one of two Germans now possess a smartphone. Over 20 percent of all savings and investment products are now bought online. By 2020 this figure will have risen to 35 percent. Business with SMEs offers particularly high potential.

Over 200 million SMEs worldwide are not receiving financial services, or not being served sufficiently. In Europe alone, 60 percent of SMEs would be prepared to utilize the benefits of online service. FinTechs are likely to soon offer better services, particularly for Germany’s strong SME sector. Fintechs have substantial untapped potential among corporate customers as well.

Want to tap the untapped resources? We, at The Gateway Digital, partner with Banks as well as Startups and empower them with the latest FinTech. To know more about our offerings for digital transformation in banking and finance, get in touch with us.