FinTech keeps on shaping the evolution of the finance sector, & its game-changing influence is rising exponentially. If a couple of years ago you could still find some skeptics, nowadays, the potential of this niche is undeniable. According to KPMG, in 2018, the total market value was estimated at approximately $127.66 billion. By 2023, this number is expected to plummet up to $306 billion.

In itself, the notion of FinTech comprises a great number of areas, such as banking services, wealth management, stock trading, insurance underwriting, digital wallets, credit scoring, peer-to-peer lending, RegTech, investing, & many more. 

According to Global Fintech Report Q2 2019, there are 48 FinTech so-called unicorns assessed at $187 billion. The growth rates are stunning. Vendors are investing heavily in the field with such promising potential. But does it guarantee success to FinTech businesses? Well, not really. It’s not all that smooth & clear-cut. Why so? 

Apart from the harsh competition, there are certain difficulties that FinTech businesses are doomed to face at some point, & the ways they cope with them are crucial for their survival. 

In this article, we are going to dive deeper into the most frequently occurred difficulties in FinTech & provide possible solutions for them. 

1. Scaling a Team

Talent acquisition is a big matter in FinTech. Here, it’s not only about engineering skills. Experience in finance technologies & understanding the key principles involved are nor less critical. 

Especially while the initial stage of growth, a startup is in high need of skilled engineers. That’s the time when a multitude of new features have to be added, yet other technical issues & bugs are to be solved as well. That’s the moment to scale a product as quickly as possible, which may be impossible without additional team members.

In its report, INSART Fintech Engineering estimates that there are at least 3 open positions per engineer in FinTech. In this extremely competitive situation, hiring talents turns out to be a time-consuming & expensive aspect. And that’s not a one-case issue: the bigger the company gets, the more problems it is likely to have with finding the right talents. 

Tip: Consider turning to established development companies that offer top-notch tech-services & have experience in the sphere. It may be efficient in terms of winning time & cutting spending. Outsourcing FinTech development usually saves money which is crucial for FinTech businesses the budget of which is far from moderate. Perhaps, that’s the main reason why the tendency to outsource in FinTech is getting even stronger. 

2. Scaling a Product

Expanding in the financial sector is not without challenges. Skills gap & competition for the workforce, as mentioned above, is a big contributor to the problem. But here we want to get a closer look into the technical & formality aspects of the matter. 

First of all, technical debt & legacy systems are slowing down the process of scaling a product itself. This results in a number of issues, such as slow transaction processing & the inability to support system high loads. As a fintech application gets bigger, it needs to move to a more scalable architecture, which is crucial for withstanding the competition & satisfying customer needs. But shifting from the monolithic structure to microservices is complicated & costly. 

Another point worth mentioning here is horizontal scaling across borders, which is nor less a complex & costly process. Local regulations & cultural barriers are standing in the way. FinTech is one of the most regulated sectors, so once entering the foreign market, the company needs to comply with the local legislation. Whether cooperating with local lawmakers or establishing specialized offices abroad, it involves lots of risks & expenses. 

Tip: To minimize roadblocks in the future, it is a good idea to get consulted by the technical & product advisers at the initial stage. It will help you think in the forehead & build a strategy accordingly. Once in a situation where legacy systems are to be changed, reach out to experienced engineers & architects that will help you transit with minimum losses in time & costs. As for expanding abroad, FinService has got to think twice before taking this step, given its risks & financial expenses. In case the decision is measured carefully & the business is firmly intended to expand overseas, establishing partnerships with the local financial institutions might be a good point to consider. It is a way to not only level the risks, but also to ease the process. 

3.User Experience

According to the survey conducted by PWC, ease of use & intuitive product design along with accessibility are the main facets to increase customer retention. The service should be clear to the customer, without detriments to its functionality. Finance service providers strive to provide faster & more convenient transactions & finance management across the channels. With the progress of FinTech, customers’ expectations are skyrocketing too, & it’s challenging to keep up with them.

Above all, customer trust, as mentioned above, is a factor that plays a huge role in FinTech. People tend to think twice before using a new technology that has access to their confidential information & money. No wonder - finance is always a delicate issue. So it may be problematic to ruin this barrier & convince users in the safety of the product.

Tip: Always focus on actual customer needs. In the constant run for innovations, it is easy to forget about what’s valued in practice. Incorporate Big Data management & get real insights into customer behavior & needs. And operating this collected data, maneuver with your strategy accordingly. Also, make sure that your customer is educated on how to use your service - provide helpful & clear instructions. 

What concerns privacy issues, it should always stay a priority of any FinTech application. Cybersecurity is another extensive topic that we are going to address separately in the next paragraph. 

4.Security Issues & Blockchain Integration 

FinTech companies have access to confidential information, such as credit card information or income. In order to earn customers’ trust & unlock the doors for a business to grow, the owners must put protection of their users’ information & finances in the first place. Yet, protecting data, providing secure transactions & preventing frauds is far not that easy. 

Blockchain is a much-talked-of technology that was adopted in the finance sector from the very beginning, in particular, to address privacy matters & overcome cybercrime. It provides secure payment transactions, minimizes fraud, verifies the client’s identity, etc. According to PWC, 77% of financial service providers are planning to incorporate blockchain in FinTech by 2020. Even though it might be pretty challenging due to several factors, in particular, due to regulation matters, blockchain technology is attracting huge investments and getting widely incorporated into finance businesses & not only there. 

It is expected that blockchain will become omnipresent across the whole financial sector in the nearest future. So in the long-term competition, its adoption is a powerful tool to consider. 

Tip: To ensure data privacy, apart from blockchain, pay attention to the following points. During the development stage, it is crucial to build a secure architecture. High-skilled engineers working in tandem with QA-specialists are key. Securing APIs is another factor you want to keep in mind: ensure that data is encrypted along the way & test its safety on a regular basis. One more helpful tactic is making use of two-factor authentication. Apart from passwords & codes, biometric identifiers such as facial recognition or fingerprints may also come in handy.

5. Innovation: Big Data, ML & AI

In such a highly competitive sector as FinTech, companies must constantly run fast enough & offer the customers better value. Innovations are an integral part of this process. Here, they happen at an accelerated speed. And making use of ML, AI & Big Data is a golden ticket to the future. 

Big Data is a technology that can bring a significant competitive advantage. Once applied & utilized correctly, it becomes a reliable source of business insights & data analytics. However, specifically in FinTech, Big Data raises a number of questions in terms of its quality, & for this reason, it is often regarded as an IT-problem. 

AI is another huge trend. But to make AI & Big Data work in sync, the specialists must use machine learning, for which normally significant amounts of data are needed. This is a challenge too, as long as the companies normally don’t obtain such data.

Many FinTech companies find it difficult to incorporate these technologies. This requires trusted pro-specialists which will maintain them, making adjustments to fit the individual business’s goals. 

Tip: Hire good Big Data & AI specialists, & make sure that analytical insights you’re focusing on are relevant to the overall business strategy. Define & describe ways in which collected data is going to be used & areas that it’s going to improve. In case your dataset is far from big, use a small dataset to train your learning model. 

To Sum Up

The FinTech businesses need to adapt to the finance industry, keeping such factors as data security & compliance with regulations at the core. 

Constant testing helps to stay vigilant, provide security as well as improve customer experience. Implementing Big Data strategies is a must, & such innovative trends as AI & ML are also important factors to consider to withstand the competition on the market.

Effective scaling & providing innovations with minimum losses in time & budget play a crucial role. The right experienced team of engineers along with counseling of legal advisers that help comply with regulations is a big part of the win in this niche.

And in order to manage above mentioned tasks in a cost-effective & time-saving manner, consider outsourcing the technical part to the development team of proven IT-specialists that have experience in FinTech. Pay attention to the relevant cases & ask for estimation of your development situation. Remember, outsourcing is more than just a trend; oftentimes, it’s the shortest path to your destination. 

*If you’re in search of a trusted IT-company to outsource development, our ElifTech team would be eager to become a trusted partner of yours. We offer end-to-end solutions & the latest technologies, managed by our result-oriented IT-specialists. Check our FinTech case studies here: Class Wallet, Asteria, Feelcapital