The Fintech industry is expanding rapidly and bringing endless possibilities to improve the financial sector. Financial technology or Fintech is the integration of financial services with technology to improve customer services. Fintech is both used by customers and businesses for several uses such as mobile banking, investment, or insurance of cryptocurrencies.
As the trend of using the Fintech industry is increasing, many new Fintech start-ups have come into existence in the finance sector. Moreover, this has created many employment opportunities in the financial sector. Even though it has various advantages, there are still some challenges faced by the Fintech industry. These challenges can affect the growth of the Fintech industry.
Why is Fintech the Future?
During the pandemic, the Fintech industry showed substantial growth in the financial sector. In the future, the Fintech industry is expected to grow exponentially. However, some factors such as global acceptance of fintech services, awareness of fintech, adoption of new technology, and so on can influence the fintech industry.
Furthermore, these factors will play a significant role in shaping the future of the banking sector. Nowadays, mobile banking and cashless transactions are mostly preferred by people as it is simple to use. Moreover, more and more people have started investing in Blockchains, cryptocurrencies, NFTs, and other digital securities. As a result, there will be more developments in the fintech industry in the future to provide suitable tools for handling these securities.
7 Challenges Faced by the Fintech Industry
Undoubtedly, the fintech industry plays a huge role in maintaining the banking sector. But there are still some challenges faced by the fintech industry. We have sorted a list of challenges that can impact the growth of the fintech industry.
The biggest challenge that the fintech industry is facing is data security. As the number of users of mobile banking applications and payments is increasing, the responsibility to secure the data also increases. User data is something that cannot be risked as its misuse can lead to many problems.
Today, various organizations use cloud services to store user data either on a local or public server. However, these servers can easily be targeted by attackers that want to steal the user’s data. Fintech firms need to maintain proper data security for their applications to reduce the risk of data theft. Two-factor authorization, biometric authentication, data encryption, etc. can help to reduce these risks.
There are many risks related to finances for this reason it is one of the most regulated sectors of all. The government will always intervene in the decisions related to the financial sector. The fintech industry has to follow the rules, regulations, and policies created by the government to secure the well-being of the people.
When creating new software, fintech firms have to work according to the regulation of the government. If the government does not find their work within compliance with the rules they can take strict action against that firm. A firm can also consult a legal department to understand these regulations.
Lack of Tech Expertise:
Even though the fintech industry has seen a significant increase in the last years, still there are some banks and finance companies that do not have a proper application and website for their customers.
In this contemporary era, where the internet has become an important part of everyone’s life, nobody would prefer a business or bank that does not have proper services.
Non-user-friendly applications and websites can cause users to distance themselves from that specific bank or firm. A fintech application has to contain proper security features, transaction guides, user account details, fingerprint scanners, etc. to make it more user-friendly.
Many people are investing in Blockchains today, so it has become an obligation of the fintech industry to build applications that also support Blockchain services. Many financial organizations are still hesitant about Blockchains. Consequently, there are now fewer financial applications that offer Blockchain services.
If you want to make your application rare, you can put Blockchain services in it. However, it is hard to integrate a Blockchain for many organizations.
Furthermore, the government and other financial institutions are suspicious of these Blockchain trends. If you want to put Blockchain services in your application, you will have to follow the guidelines and laws set by the government.
User Retention and User Experience:
Another challenge that the fintech industry has to face is user retention and user experience. User retention is hard to maintain as users easily lose interest over time. Moreover, providing an exceptional experience to the users should also be the priority of financial firms.
However, to maintain the user experience there should not be any compromise with other features. For example, a financial application should be programmed in such a way that it is easy to access for the user but difficult for the attackers.
Functional Marketing Strategies to Acquire Customers:
Understanding the target audience for fintech is difficult for many firms, as some people still want to use traditional banking applications. However, adopting effective marketing strategies can help a fintech firm to allocate its target audience and niche.
To tackle competitors, fintech firms need to adopt new marketing strategies that need funds. Advertising and marketing can cost a lot of money. Endorsement of your product can help you gain popularity, resulting in boosting your brand awareness.
Last but not least, personalized services also act as a challenge for the fintech industry. Providing personalized services is the goal of many banking organizations for quite some time. But with many users, it can be overwhelming for a fintech organization to fulfill everyone’s personal needs.
If a fintech firm can achieve this, the users can get confused due to the wide spectrum of options. However, this is something that can be overcome by fetching proper customer insights. It will help the provider to narrow down the options for the user.
As we have discussed above, there are many challenges that the fintech industry has to face and overcome. Providing a satisfactory service to the user is the main goal of the fintech industry. However, the biggest challenge for the fintech industry is the regulations and policies of the government.
In the financial sector, the government is always going to intervene because it involves people’s funds and data. Compliance with rules and regulations is the only option a fintech firm has. Other challenges can also hinder the growth of a fintech firm. However, finding solutions to these challenges is the only option a firm can go for. We expect we were able to help in understanding these challenges that gravely affect the growth of the fintech industry.