Within the last five years, technological advancements have fundamentally altered how individuals interact with their finances. Despite the fact that it’s been growing ever since the inception, there are still many challenges in financial software development faced by software developers.
Fintech businesses are focused on accelerating their growth and establishing a presence in the sector. Financial technology is enhancing and automating business processes and services. However, these obstacles stretch our creativity and foster unprecedented progress, but there is always opportunity for improvement.
● Introduction
● The Challenges Fintech Industry Faces Today in India
○ 1. Legislation Relating to Regulatory and Compliance
○ 2. Data Protection
○ 3. Populations who are unbanked or underbanked
○ 4. Inadequate mobile and technological expertise
○ 5. Trust in Cash
○ 6. Big Data and AI Integration
○ 7. Inadequate Government Support
○ 8. Industry-Specific Difficulties
○ 9. Effective Marketing Techniques for Customer Acquisition
○ 10. Tailored Services
Conclusion
According to Business Screener, the FinTech market will be valued $26.5 trillion by 2022, expanding at a 6% compound annual growth rate. The real cause for this expansion is the increased demand for loans and insurance, as well as the growing interest in investments.
Various fintech start-ups have accelerated the growth of numerous other sectors through their effective financial techniques. The industry can develop more rapidly and make more income with this breadth.
The Challenges Fintech Industry Faces Today in India
Fintech lending firms frequently encounter challenges such as lengthy fundraising cycles, missed objectives, and escalating losses. These challenges develop mostly as a result of poor loan lifecycle management. Fintech start-ups in the nation encounter several hurdles on a daily basis. Several of these are discussed below:
1. Legislation Relating to Regulatory and Compliance
Numerous rules unavoidably contribute to the stifling of Fintech start-ups in the Indian financial industry. Not only are these restrictions tough to comply with, but also make it difficult for Fintech companies to access the Indian market.
Compliance rules are enacted to establish a stringent regulatory framework with the purpose of preventing fraud. They do, however, function as significant impediments for new Fintech entrants. Before Fintech start-ups may begin operations, they must complete a lengthy number of requirements.
2. Data Protection
Data security has become a top priority in today's Internet world — whether it's mobile banking, payment applications, or Fintech in general. As is well known, traditional banking systems rely on security guards, CCTV cameras, vaults, and massive bulletproof doors to safeguard their data.
However, when it comes to virtual security, things are not as straightforward as they appear. Vulnerabilities are far more discrete and could have a greater impact on consumers, as they include not only their money but also their personal data.
Solution
With the assistance of a Fintech application development business, you may create a high-level security app. To increase the app's security, the following criteria may be included:
● Two-factor authorization
● Biometric authentication
● Data encryption and obfuscation
● Real-time alerts and notifications
● Behavior analysis
3. Populations who are unbanked or underbanked
To begin, Fintechs' expansion was slowed by India's underdeveloped infrastructure, including low internet penetration and literacy levels. While the Indian government is addressing these concerns with liberal policies, the advantages will not be apparent for some time.
The reality is that a sizable portion of India's population remains unbanked and consequently prefers cash transactions over internet purchases.
Another impediment to Fintech growth in India is the Indian community's poor level of financial knowledge. For instance, India introduced the Pradhan Mantri Jan Dhan Yojana to increase the country's financial inclusion.
However, a World Bank research indicates that after creating 180 billion bank accounts, more than 48% of them remained dormant for a year without a single transaction. Despite several measures, India is still a long way from financial inclusion.
4. Inadequate mobile and technological expertise
Several financial organisations and banks in the fintech industry lack adequate and convenient mobile banking services. While some banks attempt to duplicate websites, nobody would prefer a mobile application in today's digital age. Every user desires a smooth and comfortable method of operation.
As a result, a lack of competence in fintech mobile app development services results in unusable apps that do not use the capabilities of mobile devices. For instance, apps may be unable to take advantage of NFC chips, geolocation capabilities, fingerprint unlocking, and other features. Through the use of these features and technology, a fintech bank may provide great customer experiences.
Solution
To provide consumers with fintech application development services, your mobile device must include the following features:
● QR-code for Payments in public transport
● NFC chip in shops
● Automatic scanning of a credit card number with a lense
● Two-factor authentication with a finger-print
● This can be done using the full integration with the hardware of devices.
5. Trust in Cash
When it comes to daily transactions, the majority of Indians take a conservative approach and rely on cash. They have relied on money as a means of exchange for centuries and find it difficult to adjust to new routes.
Financial services provision in an unbanked market is challenging, as these services are frequently associated with digital frauds. Due to financial illiteracy, many Indians are unaware of the value that Fintechs provide through their innovative goods and services.
Fourthly, cyberthreats
Fintech firms work with very sensitive client data. Numerous cyber-threats result in enormous monetary losses while doing online transactions. These are completely unnecessary for customers.
Convenient technology also exposes people's internet accounts to scammers aiming to take their assets. This is a steady source of revenue for Fintechs. Fintechs must harden themselves against any threat posed by hackers. Digitally accessible financial data on individuals and businesses is vast. This raises the likelihood of cyber-attacks.
6. Big Data and AI Integration
According to Accenture, 82% of US bankers and 79% of worldwide bankers believe that artificial intelligence would transform the way banks acquire data and engage with clients.
As we all know, big data and artificial intelligence have had an influence on every enterprise. Organizations may acquire personal information about consumers, from their social standing to their financial conduct, habits, and in-app activities, using big data.
This information is critical for banks, particularly when it comes to credit ratings and other high-risk banking services. With the use of big data, AI automates the entire process of detecting fraud, doing risk analysis, and successfully managing transactions.
However, fintech companies encounter a variety of obstacles when implementing these technologies. They demand specialised knowledge and ongoing care.
If you are currently in the banking sector, integrating new technology into your present system will not be straightforward. Not only will this demand technological improvements, but it will also require a reshaping of your business and adaptability on the part of both you and your consumers.
Solution
To merge AI with large data, you must first train AI using machine learning. You will need a big quantity of data to train your system for this. The majority of banking applications are incapable of processing and retrieving a huge number of data sets. As a result, you may resolve this issue by utilising a one-shot learning model that enables you to train your machine learning system on fewer datasets.
7. Inadequate Government Support
Fintechs in India confront a severe lack of government support and incentives to safeguard their interests in the financial markets. This may be quite discouraging for young Fintech companies. Fintechs are critical for economic growth and must be provided with the essential resources to prosper.
8. Industry-Specific Difficulties
Fintechs are built on a smart business concept. This complicates their connection with other financial entities such as banks. Banks, on the other hand, are hesitant of collaborating with Fintechs for fear of jeopardising their brand.
9. Effective Marketing Techniques for Customer Acquisition
Many fintech firms lack an understanding of their specialty, target audience, and tactics. In recent years, when the majority of people continue to utilise traditional banking services, Fintech businesses have struggled to overcome this obstacle.
Solution
To improve your business and plans, you must ensure that you are much more superior to your competition. And to do so, you must either invest a significant amount of money, time, and human capital in order to provide seamless services to your consumers, or you must align yourself with traditional banks.
Offering the greatest product is not what your users expect in today's competitive environment. You must endorse yourself by informing them of your accomplishments. Additionally, you must have a powerful and successful marketing plan that includes advertising, partnership, and so on. This will not only assist you in gaining popularity, but will also assist you in increasing brand recognition.
10. Tailored Services
For a long period of time, banking has been defined by personalised services. However, in today's environment, personalization refers to communicating with a user at the appropriate time and through their chosen channel with a solution that is tailored to their specific needs.
Additionally, users are receptive to Fintech serving as their financial wellness coach. Certain users may feel overwhelmed by a broad range of alternatives, and successful customisation offers them with only the specific options they want.
Solution
To overcome this obstacle, fintech companies must possess detailed client insights. Additionally, fintech firms must study their consumers' behaviour and get knowledge about their health, social relationships, and life events. To that end, you may accomplish this aim through fostering consumer trust. You must safeguard the user's data.
However, there are other obstacles in the FinTech business that we have yet to overcome. Regulators and numerous government rules provide difficulties for fintech firms. However, in order to disrupt the financial industry, we must always strike a balance between new technology and adherence to the established structure.
Although conventional banking has a difficult time adopting new trends and technology. It is anticipated that mobile technologies will grow even more prevalent in the financial industry over time, since they benefit and facilitate people's lives while also assisting banks in operating more effectively.
