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Navigating the challenges facing FinTech firms

Half of banking customers worldwide are now using FinTech, and the arena continues to evolve at pace with more than 12,000 FinTech start-ups in operation across the globe. Financial technology has transformed the sector beyond recognition, and while there’s no chance of the revolution halting, for those in this space, there are numerous challenges.

Whether in the lending, assets or payments area of FinTech, there is common ground with the challenges, which include cyber security, regulation and customer experience.

Regulation in a variable landscape

While in all parts of the world, excluding the European Union, there is no global privacy framework, some areas will be over-regulated and some under-regulated. There is a balance to be achieved to ensure that regulation is neither stifling innovation, nor providing an opportunity for misconduct.

In the UK, one of the biggest issues affecting FinTech – and indeed businesses across all sectors – is GDPR. As FinTech companies often lack the resources that larger banking institutions have to help them navigate such minefields, they are often left to wade through the details themselves. New firms should aim to work closely with authorities to ensure they’re compliant, and also consider pooling resources and sharing knowledge with other similar organisations.

Crypto currency companies are presently largely unregulated, but have taken it upon themselves to self-regulate in order to create and build on credibility of this growing area. December 2018’s G20 Summit highlighted an ‘urgent need for a global, risk-based regulatory framework for virtual assets’ – so there is a government agenda to push this forward. It is anticipated that, at the 2019 G20 summit being held in Japan, there will be an announcement of an update to the guidance for a risk-based approach to virtual currencies.

Regulation should be seen as a positive rather than a burden, and will in the end be good for the sector as a whole, promoting competition on a level playing field. With trust being a significant factor in Fintech, regulation is key.

Concern over cyber attacks

Cyber security is a major concern for public and private businesses and organisations worldwide in every sector – just look at BA’s woes – but can be exceedingly serious for FinTech companies that are holding sensitive client data. Attacks from cyber criminals are increasing in both frequency and sophistication, and causing significant cost for businesses having to invest in cyber security to prevent being affected by such attacks.

For FinTech firms who often don’t have the financial resources to keep up with cyber security protection, which is never future-proof and always evolving in line with cyber crime tactics, employing strategies such as Moving Target Defence (MTD) is one option that is being used increasingly by government organisations and banks. By moving the points of attack and depriving hackers of the familiar or common breach points, the opportunities for attack are reduced.

Artificial Intelligence (AI) is already playing a vital part in reducing cyber crime, helping detect and prevent breaches in a way that humans couldn’t do. While AI is still a relatively emerging technology in industry, a recent study conducted by YouGov, in partnership with Palo Alto Networks, and human nature of cybersecurity Expert Dr Jessica Barker, has highlighted that more than a quarter of the 10,000 respondents surveyed would prefer cyber security to be managed by AI. Confidence in the capabilities of such technology is evidently growing, and the employment of it for cyber security will advance and play an important role in protecting our digital way of life.

Implementing the right systems

Choosing a technology partner that is the right fit for the business is crucial for FinTech companies, and having the right cloud-based financial management system like – Oracle NetSuite – implemented will help enormously when trying to overcome common pain points. With a variety of factors to consider, including having a range of transactions and multiple currencies to deal in – and the issue of regulatory compliance – achieving seamless transactions and financial consolidation will be important. By streamlining processes, lower costs and better scalability for growth can be achieved. The automation of financial and accounting processes can help mitigate risks too.

There are many factors to consider when choosing a technology partner, but looking for the right credentials, case studies or testimonials from other businesses in the same or similar sectors, and ensuring the partner has the right technical expertise and experience, is vital. An agile, flexible and results-oriented partner will help accelerate growth – the companies we are working with in this sector can tell you that.

The all-important customer experience

The nature of FinTech business is that, quite often, the human touch that customers want, and in some cases have been deprived of dealing with financial institutions, just isn’t present. This is exacerbated with the growing use of AI. Additionally, Fintech firms are still in the process of establishing real credibility around their offerings, so it’s up to these firms to educate and share compelling content to help build trust in the product/service. Infographics, white papers, case studies and testimonials are all great vehicles to help in this education mission.

While the convenience for customers using financial technology is often a major attraction, FinTech companies must be mindful about the complete omission of human interaction. This can be addressed by having a strong customer-centric ethos. Establishing a way of tracking how customers are interacting with a service, and identifying and addressing their bugbears, goes a long way to building trust. It may not always be practical to provide a personal service, but offering some level of engagement is important. Keeping customer needs at the heart of any service is crucial, so any steps that can help create a seamless customer experience should be explored and optimised.

Fintech companies face a challenging landscape as the above issues, coupled with a rapidly evolving sector and vast competition, makes the road an often rocky one. However, with rapid evolution comes huge opportunity, and with the right approach, these can be maximised and help pave the way to success.

Call us for an informal chat if you’re facing these challenges with your business, and let us explain how Oracle NetSuite and our expertise can transform your future.