Financial services in their conventional form are obsolete, according to fintech startups. New-age finance is constantly redesigning electronic money transactions and testing innovative solutions.
It’s no secret that an optimised user experience, high speeds and close-to-zero chance of transfer rejection are paramount for today’s deeply interconnected world. And while century-old banks wait around, fintech growth shows no signs of diminishing.
However, that’s only the beginning. Given the age of the financial system, fintechs are still in their infancy. Yet, they are already showing impressive results. It’s clear that the industry will develop far beyond the payments domain. Novel opportunities have already uncovered themselves in areas like data security and biometrics. That is an ongoing trend that has the potential to give rise to something far more significant.
Pandemic uncovered numerous flaws in the financial system and has only pushed fintech growth further. People, forced to sit at home, adapted internet purchases, thus increasing the demand for instant payments. The overall development gives food for thought about the future awaiting mankind. However, while it seems very bright for fintech, there are challenges that shouldn’t slip under the radar.
Better Innovative Solutions
Innovation is great, but is it better than the currently existing solutions? Not all fintechs pay attention to these small details. Eventually, the released product appears bulky for a regular user. So, it’s vital to identify advantages before building a new solution. The key problem here is to introduce something secure and practical with the potential to substitute existing conventional alternatives.
Fintech startups often employ tech-savvy people no matter their role. That’s a decisive advantage over big banks because the talent can be harvested anywhere in the world thanks to remote work practices, making the team more agile.
Another advantage of fintech is customer service. It’s quick and responsive, unlike what you see in the banking sphere. Banking tends to overcomplicate things mainly due to regulatory constraints. A massive amount of checks and extra caution towards authorisation inevitably lead to payments rejections. In turn, declined transfers do not serve conventional financial institutions well and instead drastically affect customer turnout. That’s where fintechs truly stand out.
Banks have to be compliant with laws established in the jurisdiction they are operating. Fintechs are no exception to these rules. They guide founders and developers and provide insight into how the payments are done in the country of operation.
Nevertheless, issues do prevail – the main advantages of fintech like speed, scalability, and customer service can dramatically be affected by requirements imposed by authorities. For instance, getting approval to operate can be a nightmare and take weeks, if not months. That, in turn, can limit the innovation fintechs can put in their products.
There is no objective solution. Yet, it’s better for fintechs to speak openly and truthfully with authorities rather than play a hide-and-seek game.
User adoption remains a challenge for fintech. People got used to banks and prefer the old way, even if it’s rocky and clumsy. Another issue is trust. Users tend to stick with what they use simply because it is time-proven. Think about an old car – it works fine, why change it? Fintech is similar – it’s faster, efficient and simply better, but how can it gain traction? That’s why partnerships come into play. Cooperation with major players in the field provides great exposure and a chance to build trust.
Transparency is also crucial. It’s in the power of a fintech startup to be as open as possible with their clients. That’s an area they can beat big banks that tend to hide some operations. Things like real-time payments are a big plus – they let users see how the payments are made. Tech Expertise
Fintech is growing quickly but, like any other new field, has its perks and flaws. Conventional finance, fintech and government must understand each other to enhance innovation and battle the challenges. Check out European Payments Initiative (EPI), which strives to unite the European money transfer ecosystem. Finally, fintechs require the support of tech pros that can look after standards and embrace innovation. After all, startups must be built on solid ground in today’s fast-paced world.
Latvia-born, Alina Strogonova, is a Managing Director of Muvon Payments. Having started her career in payments as a consultant for corporate e-commerce clients, she defined the best possible cross-border payments solutions. In less than 2 years, Alina managed to find the most appropriate payment solutions for nearly 70 businesses worldwide.