Remember the last time you transferred money online to a friend or paid at a restaurant with your smartphone? Those were made possible because of products from the FinTech market.
FinTech apps are becoming a part of our lives more than we realize. With digital payments and enterprise finance solutions mobile banking becoming a norm, the FinTech industry is growing at a fast pace.
In fact, 96% of consumers are aware of at least one FinTech service. 75% of them use a minimum of one FinTech product.
While the consumers are open to adopting FinTech products, there’s still huge competition and several challenges in this sector that companies need to overcome. Let’s discuss the top FinTech challenges and ways to conquer them.
Building Trust and Credibility
With the introduction of new disruptive technologies and modern solutions, it is hard to convince the early adopters to trust the brand. Even when that happens, it is challenging to retain customers in the face of new FinTech applications coming up.
Solution: Build a loyal audience base with content strategy & social media campaigns.
To convert leads to loyal customers, you must first understand the four stages of a customer journey. It begins with attracting the customer, convincing and closing them towards a purchase, or any conversion for that matter, and finally creating repetitive customers and word-of-mouth advocates.
So to do that, we need to understand the customer segmentation and prepare a marketing strategy to target them. This strategy will serve as the base for customer acquisition and sales pipelines for the next few months to get the early adopters rolling and create the buzz.
Once you’ve managed to rope in new customers, the key here is to retarget them with marketing messages to make sure you stay in their minds. You can use user stories, reviews, and educational material to help customers engage more with the product.
Choosing the Right Tech Stack & UX
The right tech stack plays a vital role at every turn in any business, especially for the technology-driven market like FinTech. The tech stack will determine the performance of your application. It will help your developers to code faster, which means faster development cycles and quick product updates.
However, choose the wrong tech stack and you’ll find yourself taking a long time to fix even the basic bugs. Sometimes, when a platform or a language becomes unsustainable, it can mess with the whole balance of your application.
Solution: Look for commonly-used tech stacks in FinTech with your system architects.
When you’re choosing the frameworks and programming languages to use for product development, you need to do in-depth research on every single technology you choose. The right tech stack will make your job so much easier to maintain your codebase and spend less money on maintenance costs.
You can start by comparing the popular tech stacks already being used in the FinTech market and evaluate them based on your useability requirements and budget. Make sure to give your system architects a free hand to choose the best tech stack they believe would help implement your idea.
Here are some of the common FinTech tech stacks used:
- SQL Server
For blockchain projects, FinTech companies are using Scala, Ruby on Rails, .NET and Go. You can choose the ones that would work well with your product idea and your integration requirements.
Ensuring Tight Security & Data Privacy
Did you hear about the ransomware attack on Finastra just a year back?
Finastra, one of the world’s largest FinTech companies with offices in 42 countries, took their servers offline voluntarily in March 2020 when they noticed a ransomware attack.
When such top financial firms are vulnerable to unscrupulous attacks, it is even scarier for any new and upcoming FinTech company. In fact, in a survey by EY on global FinTech adoption in 2019, 71% of the adopters say that they worry about the “security of their personal data when dealing with companies online.”
With the customers being concerned about their data security and privacy, it is essential more than ever to reassure them with foolproof security features.
Solution: Establish high-level security
Customers are trusting FinTech apps to keep their confidential banking information safe and secure.
You should employ high-level security features like AI fuzzing, data encryption and obfuscation, behavior analysis, and other relevant technologies to make your process secure.
On the customer side, you can implement two-factor authentication, biometric authentication, real-time alerts through messages, emails, and phone calls and educate them often about the best ways to keep their information secure.
Scaling the Startup
The lifecycle of a startup looks something like this: Create a product, customize it regularly to fit the market needs, generate loyal customers, reduce customer acquisition costs than customer lifetime revenue, creating a loop of happy customers bringing in more, and finally, scaling.
While numerous FinTech startups excel at most of these initial stages, only a few of them have truly entered the scale-up mode. This is majorly due to a few specific reasons like:
- Scaling before achieving the right product-market fit
- Focussing on opportunistic sales than long-term sales pipelines
- Retaining the same management structure
- Working with the wrong type of people
Solution: Collaboration between the fast-growing FinTech startups and corporates
One potential and effective solution for handling scaling up challenges is a collaboration between the startup and corporates.
While there are collaborations in the FinTech market between lenders, banking service providers, and startups, a collaboration between a FinTech startup and a large organization for scaling would be different.
Based on the space you’ve carved out in your niche, you can add value to corporates in exchange for taking a load off your scaling needs. This could prove beneficial in increasing reach and cutting acquisition costs.
Complying with Government Regulations
FinTech companies are under tremendous pressure to understand and comply with government regulations. In fact, when there’s a breach in compliance, it can lead to major trust issues from the end-users, not to mention the struggle with the government.
According to a survey by PwC, 82% of people believe the government should regulate the data used by companies and 80% agree that government regulations are crucial for protecting customer information.
With customers stressing the importance of compliances, it is essential for companies to be on top of it.
Solution: Hire a consultant to oversee the compliances
Government regulations are in place to protect the customers. So, companies must make sure that their transactions and operations are well within the compliances. And one best way to do that is to hire a legal consultant.
This consultant can help ensure that you’re following all the regulations and keep you informed about any new regulation updates. The consultant can also sit in for new features or product developments and advise the team on the regulations.
For US FinTech companies, here are some of the regulatory laws and institutions that need to be followed:
- Federal Trade Commission
- Consumer Financial Protection Bureau
- State’s data breach notification laws
- Gramm-Leach-Bliley Act
- Financial Industry Regulatory Authority
- Fair Credit Reporting Act
- Fund Transfer Act
- Federal Deposit Insurance Corporation
- Securities and Exchange Commission
- Commodity Futures Trading Commission
- New York Department of Financial Services Cybersecurity Rules
- Financial Crimes Enforcement Network’s Anti-Money Laundering laws
You should also comply with the European Union’s GDPR if you have customers from Europe.
FinTech apps are growing in number and competition is becoming intense. While there are so many challenges, you can turn them around into an advantage with a few purposeful strategies. It is vital to stay on top of your customer requirements, security features, and regulations to register that initial success and make way for scaling and keep providing the best user experience.
Also read our article How Startups Can Leverage Artificial Intelligence and Machine Learning for more information that can help you. What is your biggest challenge as a FInTech startup? Let us know in the comments below.