Fintech software development: what to keep in mind

Fintech is the driving force behind the entire finance world, stimulating the adoption of new technology. All this is accelerated by high competition among fintech companies making new services appear like mushrooms after rain. Heather Cox, Citi’s Chief Client Experience, Digital, and Marketing Officer, said back in 2015: “People need banking, but they don’t necessarily need banks.” The increasing demand needs to be satisfied, so no surprise the landscape is changing with the growing number of customer-friendly services, while banks are forced to do everything possible to retain customers as it is challenging for them to compete with the startups’ lightweight, precision, tech efficiency, and talents.

So what should a fintech startup take from this? Launching a project, a new company should pay a great deal of attention to the software provider. If you want to keep up with the industry, you need to make tons of changes in your platform, add services, more accessibility, flexibility, and relevance. This is where the wrong software choice can cost you considerably.

But how do you make the right choice at the very start? You can get a reliable assessment of your software choice simply by doing a check against a number of criteria. This article will give a run down on what to keep in mind.

What comes under Fintech?

Fintech (Financial Technology) is the delivery of financial services via digital technology, like Big Data, Artificial Intelligence and Machine Learning, Blockchain, Cloud Technology, Biometrics, and more. Basically, it’s software that makes dealing with money more accessible, faster, and more reliable, which makes fintech a huge competition to traditional finance over customers.

Fintech includes:

• Loans and credits
• Blockchain and crypto
• RegTech
• Personal finance
• Billing
• Insurance
• Equity markets
• Money management
• Money transfers
• Mortgage/Real Estate

Who can benefit from Fintech?

The key players in the finance market can be broken down into a few groups:

• Traditional finance companies. Those who manage, invest, exchange, or hold funds on customers’ behalf.
• Tech companies. A lot of tech giants expand their business into finance. Some examples are Apple credit card, Alibaba banking, and Uber Money.
• Qualified investors. The stock market is diverse, and market participants have different sets of rules, allowing them to conduct simpler or riskier transactions. Qualified or professional investors work with financial instruments not available to general public.

Fintech market-shaping technologies

Let’s look at the key technology that has a great influence on the fintech market.

Mobile banking

Like we talked previously, Bank branch services are going away, being replaced by mobile banking: in the US, 169 million people use mobile banking, and that is 65% of the population. The growing popularity affects user expectations and preferences. Financial institutions that fail to meet these expectations risk being left out.

The most common mobile banking options today are:

• Smartphone/tablet apps
• SMS banking
• USSD banking

Primarily, we refer to the first option — mobile banking apps. This user experience has certain differences from Internet browser banking, and the rapid growth of mobile banking app market is resulting in apps with different functionality, controlled by various operating systems, with the following extended features on supported devices:

• Biometric authorization (fingerprints, retina, face recognition etc.)
• Contactless payments (for NFC-equipped devices)
• Finding the nearest ATMs through geolocation
• Reading payment details from photos or QR-codes
• Photo check deposit
• Built-in antivirus
• Instant notifications on transactions and other operations (push notifications).

Blockchain

Blockchain is a continuous chain of blocks containing all transaction records that, unlike conventional databases, cannot be altered or deleted — you can only add new data. Since many copies of the entire chain are stored on independent users’ computers (protecting all the information in case of one or more computers’ failre), blockchain is also called the distributed ledger technology.

Originally designed as a security-aimed solution for cryptocurrency transactions, blockchain is now one of the hot spots in the fintech development. This technology minimizes risk for all market players with the following benefits for fintech:

• No single control center or storage location
• Data security due to multiple data duplication
• Faster transactions without intermediaries
• Transparency between the involved parties
• Real-time performance tracking and reporting
• Cost savings by reducing financial back-office staffing

Here are a few ways you can integrate blockchain into your fintech:

• Build a brand new customized fintech software that meets all your business needs, is highly adaptable, efficient, and with the ability to make any changes as needed.
• Customize your existing software with advanced blockchain-based features. It will take less time than creating a stand-alone solution.
• Use a ready-to-use free-access financial service. These may include a limited number of functions but be suitable for short-term goals.

Artificial Intelligence and Machine Learning

The largest credit institutions were one of the first to appreciate the benefits of adopting AI technology having already developed AI strategies, and many of them running their own AI departments. According to Autonomous Next research company, banks will be able to reduce costs by 22% with the help of AI by 2030. As a result, the savings of financial institutions could reach $1 trillion. Moreover, this approach has proven to be a reliable way to stay ahead of the competition and provide customers with a personalized experience.

How can AI help startups compete with the market sharks?

• User engagement. Tracking app users, providing immediately response to customers (chatbots) or collecting analytics on customer preferences and behavior are a few key AI-based solution examples.
• Customer support. AI and Machine Learning eliminate the risk of human error and save your long-term user support costs, not to mention addressing numerous security gaps that can be easily overlooked by a human — this rule applies to any data management task.
• Process automation. Apart from addressing financial needs directly, AI can streamline any business process ultimately reducing processing time, cutting recurring costs, automating internal procedures, and providing accurate reporting.

AI use is not limited to the above and can expand beyond the obvious scenarios. For instance, AI can help an intermediary aggregate a variety of small ones provided by different companies into a single complex product for B2C market section. It also helps entering the B2B market both through competition and partnership with larger players.

Artificial Intelligence can solve several important financial sector needs: improved service for users, and increased customer base, reduced costs and streamlined business processes — for financial organizations.

RegTech (Regulatory Technology)

RegTech is a technology domain with the purpose to track the accuracy and legitimacy of all actions during financial operations. With so many rules and requirements set by legal authorities and markets, it is difficult for companies to keep up, and often they end up spending big sums on lawyers (at best) or fines (at worst). Through its objectives (customer identification, data processing and protection, financial risk analysis and dispute resolution), RegTech will help you comply with legal regulations and avoid problems.

Certainly, these are not all of the fintech market trends, but definitely a excellent foundation for introducing them into your startup. If you need a custom-tailored functionality based on your specific business needs and goals, contact us to get the best solution for your software development.

Fintech market overview

The pandemic has given a significant boost to digitalization. Many notable large players have expanded online with new online financial transaction formats, which has “exploded” the growth of e-commerce in fintech. In 2020, the industry nearly doubled (by 97%), followed by $100 billion in 2021 worth of investments in 2021 according to Matrix Fintech Index.

Current market standing

Both the pandemic and the very competitive nature of the finance market has led to a spike in online payments and escalated the problem of transaction costs. Consequently, business is updating the demand for alternative ways of online payments, including the use of electronic wallets, QR-codes and cryptocurrencies. It doesn’t mean that international payment services are going to fade away. However, the changing role of Visa, MasterCard, and acquiring banks calls for appropriate solutions.

As of today, following 2020–2021, the market situation can be described by the following:

• Two out of three financial transactions are done online.
• 40% of existing banking functions will be performed with machine learning technology
• $50 billion invested in fintech industry every year
• 500+ fintech products are released every year
• With the increasing number of users turning to mobile payments, the market growth rate will exceed 30% and hit $12.06 trillion by 2027.

Fintech software development challenges

The companies may find themselves a bit overwhelmed by its growth rate without fully realizing that. Corporations fail to conduct market research using lean methodology. Incubators, promoters, and investment funds are flooded with unviable startup presentations. Founders can’t formulate the problem they wish to solve, yet they plan to spend the investment on advertising. Detecting a real problem is much more important than generating ideas, and here are some of the painful issues:

Consumer data security

Since this is all about money circulated in the globally accessible digital space, data security and privacy protection should always be the top priority in the fintech community. Every fintech company, regardless of size, bears a grave responsibility to do whatever is necessary to protect the entire infrastructure of the financial services industry against increased overall vulnerability within an interconnected global communications enterprise.

Any fintech company that fails to do everything in its power to protect itself and, in turn, its customers from the negative consequences of poor security practices is, no doubt, in gross breach of its duties.

Compliance with the law

Again, money-driven, the financial sector is one of the most legally regulated sectors. Companies failing to comply with the security protocols face threats from cybercriminals as well as financial penalties from regulators.

To safeguard yourself both from fines and government sanctions, and from the compromise and disclosure of your users’ personal information, it is necessary to check your software for compliance with the law before building it. Make sure you or your legal department is aware of the latest government regulations before you enter the market.

Ready to go digital on your financial services?

Fintech is the area that requires incredible precision and accuracy in all operations. Luckily, digitalization helps to achieve just that. With security vulnerabilities closed, the software can be used further to improve employee productivity, customer satisfaction, and overall business performance.

The right fintech solutions will make life safer and easier for all parties involved. Whether you are a startup or have an existing product, our team at Interactive Design can bring you web development in fintech and implementation of any modern digital technology.

With all the variety of solutions, we adhere to a unique set of proven tools to ensure that your business gets the maximum benefit and avoids unwanted costs. Contact us with your request, and our experts will take it further to analyze your current situation and help you choose an effective solution to scale your business!