Fintech is an integral part of modern finance. It has changed the traditional understanding of financial operations. Fintech opportunities let people enjoy the convenience and speed in managing their financial operations. Moreover, it has an enormous potential to change global financial life for the better. During the coronavirus pandemic, Fintech has become the way for businesses and people to overcome new issues in finance caused by social distancing and other governmental restrictions. However, being a new tool Fintech still faces many hurdles. In this article let’s look into the main Fintech industry trends and challenges in 2021.
Fintech development has triggered some alterations in financial life. As a result, it became one of the most luring spheres in the modern world. According to Statista, the total number of Fintech investments worldwide increased from $50.8 billion in 2017 to $135.7 billion in 2019.
Fintech has already achieved remarkable success in the business environment. Moreover, its continuous development is bringing to life new advanced technologies, improved business models, and more freedom in managing financial operations. Here are some Fintech trends that will dominate in 2021:
1. AI and Machine Learning:
The use of AI and ML will continue to grow as these technologies help to manage large amounts of information and help developers to create more efficient Fintech software. What is more, not only can voice technologies powered by AI improve voice assistants and help customers to find solutions to everyday questions but also serve as biometric information for payment authorization.
In 2021 the specialists expect the traditional financial institutions to cooperate more with Fintech companies. They are looking forward to an open banking opportunity that enables data networking across banks and Fintech start-ups.
3. Financial literacy:
Awareness of Fintech tools is the key to the improved customer experience. The better people understand how to use Fintech services the easier it is to meet their demands.
Nowadays it’s possible to make a payment with only a click. However, the increase of cybercrimes makes Fintech software developers pay more attention to cybersecurity issues. Experts believe that the development of biometric security measures will bring Fintech to a significantly new level.
The Main Fintech Challenges
As any other sphere Fintech tackles many difficulties on its way. Let’s look into the main challenges for the financial services industry in 2021.
In May 2018 Europe introduced a new regulatory document called General Data Protection Regulation (GDPR). This set of rules is aimed to enhance personal data privacy and transparency for European residents. However, it becomes a considerable burden for financial institutions since they have to find a way to comply with all GDPR requirements not to pay a high penalty.
While big financial companies have several experts working on that issue, small Fintech start-ups can’t afford that. So GDPR compliance usually becomes the reason why small companies start operating in the shadows.
Cyber-attacks remain a serious concern for Fintech companies. According to the survey of the Financial Conduct Authority (FCA), financial data breaches increased from 25 in 2017 to 145 in 2018.
Modern cyber attacks are not only aimed at theft but try to destroy the system or change it to diminish trust. Although cybersecurity measures are usually expensive Fintech companies should focus on the benefits they provide. Cyber attacks lead not only to high expenses on system reestablishment but to the loss of public trust that often can’t be restored.
The main difference between traditional banking and Fintech services is the human touch. While Fintech tries to introduce enhanced services with the help of AI and Machine Learning human component is fading away. Many people feel uncomfortable knowing that they are communicating only with machines but not humans. Thus, It becomes challenging for Fintech companies to convince people, especially the elderly, to refuse from traditional banking and swap to Fintech services.
What is more, some companies in pursuit of technological advancements forget about back-up in emergency situations. In case something goes wrong with the technology and there is no human to substitute the machine, the customers totally lose the ability to use their accounts.
It sounds surprising, however, not only is it difficult for Fintech companies to attract customers but also employees. It’s complicated to find a high-skilled and experienced specialist for Fintech software development. Moreover, software engineers are not attracted anymore by only high revenue, they want the company to adhere to their personal values and comply with their life philosophy.
Lack of Expertise
Many countries still have a lack of Fintech software development expertise. Traditional banks often try to copy their websites offering clients user-unfriendly interfaces. The inconvenience of mobile apps leads to low integration of Fintech services and poor customer experience. To solve that issue, companies can form a special Fintech development team or hire an outsource expert in this sphere.
Blockchain integration into Fintech services is not only a way to improve financial security but also a solution to other common issues. Many Fintech companies already use Blockchain technology in such disruptive areas as fraud management, instant payments, smart contacts, digital currencies, and others.
Fintech is a rapidly developing sphere. It breaks the barriers of traditional banking systems providing customers with innovative but, on the other side, highly effective and secure solutions. The future of Fintech depends on the integration of new technologies such as blockchain, AI, Machine Learning, etc., and the enhancement of cybersecurity measures.
Having solved some of the existing issues Fintech companies continue to face new challenges. Nowadays, to stay on top of the market competition it becomes crucial to meet the technological needs of customers by building user-friendly Fintech applications and to comply with a great number of requirements imposed by world regulations.