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Hello! This is your reliable partner in finance and information technology - Octo Strategy. You know, each of us faces different challenges every day. There is nothing else to do but to solve problems, right? The same way we have to solve the problems faced by business and in the end by the whole industry.
The year 2021 saw many interesting trends in fintech, from innovations in payments, such as voice-enabled transactions.
For much of the year, fintech CTOs were busy creating new systems and rapidly scaling existing ones to meet the growing demands of their ever-evolving industry.
The digital revolution has greatly expanded the various areas of business where financial technology is a huge part of the transformation. Insurance companies, banks and trading platforms are now turning to FinTech app development to make it easier to communicate with users and simplify operations. Experts predict that the FinTech industry will grow at an average rate of 12 percent in the coming years and reach 188 billion euros in revenue by the end of 2024.
However, as the FinTech sector grows in popularity, the industry faces many challenges. What are we talking about? Let us tell you in a moment.
Fintech Cyber Security
The use of FinTech innovations increased by 72% during 2022 within Europe, which has been driven mainly by immense investments. However, as with any rapid growth, the sector started to experience several unintended consequences. The primary one was related to new security concerns. It is not surprising that cybercrime is on the rise today and not only in the FinTech space. According to a report, every 39 seconds, new attacks on users’ profiles appear. Fintech companies are suggested to be the main target of cyber hackers in 2022.
This is because people hugely rely on digital money and prefer to manage it online instead of using cash. Therefore, FinTech companies and their applications have lots of sensitive user data that they have to protect in advance. As a result, even large market giants like popular banks and brokers suffer from these threats from time to time. In order to ensure a high level of security, companies may opt for tech advancements that allow for better data protection. For instance, two-factor authentication and biometric authentication work pretty well, and the practice shows that applying this protection can save the situation when someone is trying to steal the data.
Data encryption and obfuscation are also a great choice for those running FinTech apps. You can also apply notifications in real-time to let users know when someone wants to enter their profile in order to prevent threats. However, it is always best to make sure your app is secure and use several points together for a higher level of protection.
Lack of Tech Expertise in Mobile App Development
Among FinTech challenges in 2022, lack of tech expertise is almost the main one. The development of high-quality and safe FinTech solutions, such as banking apps that will also have smooth functionality, ultimately requires in-depth expertise and solid background. Not everyone is able to craft an in-house team of skilled engineers who are aware of the newest tech advertisements to make sure the app has a high-security level without compromising the quality.
As a result, more companies now choose to outsource FinTech app development to get a well-thought-out application. A ready-made team usually understands financial projects and minor points that have to be followed for success. You can hire an outsourcing team that has expertise in FinTech app development with real-life cases to make sure your app will be done by professionals only. In addition, outsourcing helps to reduce costs for development in the long run and lets you focus on more vital things like marketing.
Use of Modern Technologies
Even though the FinTech sector grows apart from other tech innovations, it is hard to resist new technologies that boom in the market today. And what is more, there is no valuable reason to avoid using them in financial software. This is because these digital initiatives seem to only drive the popularity of these apps and generate more revenue for the industry.
Technologies like artificial intelligence, big data, and machine learning can bring valuable benefits for companies looking for more clients and business opportunities and who also want to reduce costs. However, companies will also require experts to bring these ideas to reality to reap benefits instead of struggling with unsuccessful attempts.
Innovation
One of the CTO’s primary responsibility is to foster continual innovation.
The challenge is to stay current with technological advancements without succumbing to the latest fad.
Emerging technologies are reshaping every industry at a faster pace than ever recorded previously. However, when something new is introduced, a CTO should decide whether or not to accept it.
Alternatively, when the old system becomes difficult to maintain and scale, the CTO should determine whether to preserve it or replace it. Occasionally, the race for popular technology can be a cruel joke on the CTO and end up being a nightmare.
However, the issue is twofold. To begin, if engineering managers decide to incorporate new technology, they will require personnel who are familiar with it. Typically, these individuals are scarce and expensive. As a result, a lack of experience in developing technologies complicates the process, prolongs time to market, and increases costs.
On the other hand, if companies do not upgrade their technology stack, their systems will become inefficient and they will struggle to recruit software professionals willing to work with obsolete technologies.
Hiring and retaining quality engineering talent in a hot job market
The evolution of fintech is happening at an ever-increasing pace, so recruiting IT staff can be a real challenge, especially at a time when the skills gap in technology is widest.
New cutting-edge technologies are leaving behind those who are slower to learn, which means that most IT teams at fintech companies are understaffed in the long run.
One way to alleviate this is to locate their offices in "tech bubble" locations where the talent pool is rich, or to hire remotely to open up access to a national pool of applicants.
CTOs in all industries face a shortage of skilled labor, but fintech is feeling it more than others, simply because it is growing much faster than other industries.
Attracting and retaining the best engineering talent is expected to be more challenging in 2022, especially with more remote and fully distributed teams. In the U.K., for example, experts predict that the growing shortage of IT professionals will reach a record 3,200 skilled workers within a decade.
While remote work has increased access to a global workforce, the competition has become much greater, especially for smaller companies vying for talent with industry giants that offer higher compensation, flexibility and opportunity. A common problem is that small startups with limited budgets can't afford the high stakes needed to hire and retain quality engineers.
You have to find a way to cut through the endless LinkedIn messages candidates receive and make them an offer that stands out. Apply less corporate jargon and confusing job duties and focus more on providing stable growth opportunities for top talent.
To cope with the talent shortage, fintechs expect to increasingly outsource specific projects. However, outsourcing comes with a number of unique challenges.
Industry Regulations
Regulatory compliance is also one of the most vital challenges in the FinTech industry. This is because of the immense increase in regulatory fees that relate to earnings and credit losses after the 2008 financial crisis. Therefore, when developing an app, you need to make sure the software is compliant with all vital points approved by the government. As a result, this may strain the resources of your product and even affect the ability to correlate data from disparate sources.
In order to solve this issue, the best advice is to hire a legal consultant that will be responsible for training, clarifying plans, and collaborating with your team to make sure that the final product meets the market requirements and your personal needs.
Winning and Nurturing User’s Loyalty
As we mentioned before, cybersecurity is a popular issue in the financial sector. Threats are common, and users also know about them. As a result, it might be challenging for FinTech apps to get users’ trust and loyalty. This is a complicated task for startups who just entered the market and have lots of competitors. Alongside gaining trust, it is essential to prove the data protection and top-notch quality of their product.
It is worth noting that you won’t be able to gain or support users’ loyalty and trust within one day. It should become your habit to always nurture your users and offer the best solutions for their peace of mind. It can be achieved through several main directions: credibility, collaboration, and outstanding customer experience.
This can be earned through ensuring transparency of every company’s activities. You can also create customer communities and events and constantly interact with your customers to learn more about what they like or don’t. Outstanding customer experience can be achieved by making sure your service meets their needs and through pleasant UX/UI design.
Final word
There’s no doubt that 2022 will present unique challenges for the fintech industry, with CTOs and technical managers at the forefront of navigating possible pitfalls.
The FinTech industry is growing today. More and more traditional banks are turning to mobile apps and websites to gain more users and stay in demand during the crisis and unexpected situations.
In the end, what matters most is how key fintech players reinvent strategies and leverage collaboration to meet these challenges and achieve unprecedented growth.