Financial technology has become more specialized than it was a decade before. Who thought cashless transactions and payments would become mainstream? With the rise of technical aspects like data analysis, cloud computing, FinTech is developing rapidly with time. With that said, there are growing risk factors surrounding the FinTech industry. Today, we will be discussing the present FinTech challenges and the supposed challenges in the future that need to be overcome.
The Challenges For FinTech At Present
Many banks and financial institutions all over the world have patchwork systems consisting of several elements. Some of these elements are a decade or older than the others, which can collapse and create problems. FinTech companies need to solve this problem by making sure that the older sections are often updated. This can be a time-consuming and expensive procedure.
According to Zed Founder and entrepreneur Alan Safahi, due to COVID-19, the world is suffering from the financial crisis, affecting the economic aspect of the Finance and FinTech industry, making them cost-conscious. They demand the most efficient and innovative technology to work with at a fairly reasonable price value. This tight budget calculation can create an issue in terms of buying technology from IT teams. The developers have to name a price that the companies can afford, or the companies expend a significant proportion of money to purchase and risk their economic condition even more.
When the financial crisis surfaced, the finance industry witnessed a staggering increase in regulation protocols. Increased regulations mean more companies need more complex software for monitoring the activities while keeping the coast clear for regulatory modifications. Another aspect of the supposed increase in regulation will be slowing down some trades’ pace to gain market stability. Such regulations can wind up the market and the companies associated with it.
Technical crashes and errors are nothing new in technological fields. However, there have been an immense amount of high-profile technical failures and issues in the FinTech industry over the past couple of years that had businesses extremely affected. In 2010, we witnessed the market-wide flash crash caused by high-frequency trading. And in August 2012, US trading firm Knight Capital suffered another major technical glitch that caused dramatic trading disruption on the New York Stock Exchange.
Supposed Future Complications For FinTech
More technical problems
If we oversee the future, technology will be more advanced at the time. Therefore, the majority of technology works will be assisted by software, FinTech apps, etc. We are also expecting many banks and financial institutions to take advantage of technology in payments and payment processing. Even insurance providers and legal firms will have a say in the FinTech industry. Huge strides in tech and mobility are already allowed for Robo-advisors, mobile POS, etc., to get the job done in a short time efficiently. This can bring in more confusion in the technical field if the regulatory rules aren’t updated.
Updating regulatory protocols means a renewed focus on technologies, for instance, cybersecurity and data privacy. Hence, the fintech industry can’t afford to leave a single loophole, or else it risks users’ privacy. According to Alan, customers now want full transparency on how their data will be used. For that, robust and entirely safe security will be needed to ward off any malignant force. Fintech will need to invest more in technology in the future to keep those data safe and in control of the user.
With the growth of technology, Fintech businesses have evolved and upped their game as well. However, with growth comes more added responsibilities. And one responsibility is to provide a better customer experience because your business will progress if your customers are satisfied with your service. One challenge that FinTech will face will be how efficiently and uniquely they improve user experiences. There is still a lot of ground to be covered for delivering a better user experience. The list of criteria varies from companies to companies; some might add a more progressive system to their fintech apps or improve the payment systems. Some might make the network more secure and usable for a user, and some might tweak the layout for smooth access.
We are unsure about the whole situation but right now, in 2021, this is the biggest reason for the dwindling business and financial growth. Nobody is sure when the pandemic will stop, so we are living in uncertainty. COVID-19 has indeed brought a downfall to more or less every business, and FinTech is also recovering. Apart from that, stocks aren’t doing well either. The whole situation still needs a great deal of time to revert. As a result, finance and FinTech will still set each step carefully and cut the cloth according to its length. As a result, the market might take time to heal from the flow.
The predictions are based on the current condition of the FinTech industry, so this isn’t carved in stone. We need to think about the current challenges for FinTech that need to be sorted out first. If we think about one good outcome about COVID-19 for FinTech companies, that will be the cashless transactions and payment in these dire times. People rely on credit cards, international wire transfers, eWallets, etc., for business transactions, such as salary payments, supplier payments, remittance, vendor payments, and many other reasons.