The last decade has seen the rapid development of various projects related to the use of digital technologies that promise to transform society. Indeed, in the age of digitalization, it is hard to imagine our lives without technology. After all, we use them every day, sometimes without even realizing it. There is nothing wrong with that. Moreover, today’s industries not only go hand in hand, creating new products and services but also closely interact with each other, striving to offer the world novelty through custom software solutions that change our daily lives.
The financial industry today is inextricably linked and deeply rooted in every business sector you can think of. With the rise of e-commerce and the spread of the global COVID-19 pandemic, many people are opting for online services and purchases. And who are we to blame them? Online you buy food or household goods; online you buy clothes for yourself and your family; online you order dinner; online you watch movies. This is what has become the new normal, which has led to the creation of online payment systems, online banking, and much more. This is what fintech is, it is trending today.
FINTECH: What Is It?
The word «financial technology» (often referred to as fintech) encompasses technological advancements and innovative approaches that seek to rival conventional financial practices in the provision of financial services. In essence, organizations operating within the financial sector use various technologies as part of their routine operations to expand their enterprises and enhance the overall user and partner experience.
Fintech has gained significant traction across several industries such as banking, investing, trading, insurance, e-commerce, education, fundraising, philanthropy, and cryptocurrency. As a result, the word has evolved to include a more expansive scope, while before it mostly referred to back-end technology in banking and trade.
Fintech innovations consist of two primary areas:
- Personal interaction with the clients
Due to advancements in data collecting, organizations now possess a plethora of novel communication channels that enable them to engage with their clients in a more personalized manner, as opposed to using mass communication strategies. In this manner, customers are provided with enhanced services and an improved overall experience, resulting in the establishment of a particular kind of loyalty.
- AI and data analytics
Financial institutions and agencies are seeing expanded opportunities via the use of technologies that enable cost reduction, revenue growth, and enhanced overall performance. This is achieved by using Robo-advisors and chatbots for customer communication and acquisition. The issue of handling client data and obtaining agreement from customers for its use is a matter of great concern for several fintech businesses, particularly due to the scrutiny of national governments. In recent times, European companies have been exposed to the General Data Protection Rule (GDPR), a regulatory framework that mandates organizations and service providers to carefully examine their data governance practices ensuring complete compliance with the aforementioned rule. Therefore, it is essential for organizations engaged in data collection to adopt open and transparent data management strategies to establish trust with users and maintain a strong position in the market.
An increasing number of firms globally are seeking the services of software development companies to not only respond to developments in the financial industry but also adapt to them.
Technologies That Transform the Financial Market
Startups are considered to be the ones who have driven the transformation of fintech into what we know it today. The emergence of fresh ideas and visions, as well as the growing number of smartphone users, made the shift toward technology inevitable. Global financial giants had to keep up with the times. Increasing competition for partners, investors, and clients opened up new prospects for numerous businesses to enter the market with something to offer, as the niche remained » trendy» from the point of view of financial management.
According to the report, in the first quarter of 2023, the fintech industry was the second largest investment after enterprise software (driven by OpenAI and other generative AIs), with more than USD 14 billion allocated.
Challenges In Finances and Their Solutions
1. Internet security
Ensuring data security in fintech applications is more challenging than in traditional financial solutions. Attacks in cyberspace are harder to identify, hence, they pose a greater risk to users’ finances and private information.
Solution: Software engineering solution providers can help develop applications with a high level of security. The application can include behavioral analysis, two-factor authentication, and real-time alerts.
2. Compliance with regulatory requirements
The financial sector is the most regulated. Around the world, countries have different rules for managing financial services. Hence, FinTech is subject to these regulations.
Solution: Make sure that the software complies with the law before using it or developing an application based on it. You can hire legal counsel or a fintech software specialist to evaluate the underlying policies and guidelines. Make sure that your legal team is aware of the latest government regulations before going to market so that you can make any necessary adjustments without delay.
3. Insufficient knowledge of mobile technology
Some banks and financial institutions in the fintech industry need more efficient mobile banking services. Due to the lack of experience in developing fintech applications for mobile devices, others offer unfriendly applications that do not take into account the capabilities of mobile devices, such as NFC processors and biometric authentication. This can lead to significant problems and a poor user experience.
Solution: This is where the importance of fintech app developers becomes apparent. Hardware integration with devices that provide seamless payment options, such as QR codes for payment in public transportation, NFC sensors in stores, automatic credit card scanning, and biometric two-factor authentication, can be all set with the help of professionals.
4. Integration of Big Data and Artificial Intelligence
Big Data and Artificial Intelligence have transformed the financial industry, enabling personalized services and effective risk management. However, the adoption of these technologies poses challenges that require knowledge and adaptability on the part of banks and consumers, as they require technological modifications and restructuring of existing systems.
Solution: To integrate Artificial Intelligence and Big Data, an AI system needs to be trained using machine learning. However, many banking applications need help managing huge data sets for training. One approach is to use a one-time learning model, which allows training on smaller amounts of data and solves the problem of insufficient data sets.
Technology innovation is driving the fintech revolution, which is completely transforming the industry of finance. The combination of human ingenuity and technology promises to unlock new dimensions of convenience, security, and opportunities in the realm of finance as we move forward.
Fintech’s voyage continues with the relentless march of technology, leading us toward a future in which financial solutions are not only innovative but also integral to our daily lives.
Stay tuned for additional insights into the ever-changing world of technology and its revolutionary effects.