Innovations in financial technology, fintech, are revolutionising how people, banks, and businesses manage their money. Modern advances, even within the last five years, have radically changed how people engage with their finances.
Fintech companies are consistently disrupting the status quo and driving growth while existing providers do all they can to keep up. Financial technology, within traditional organisations and modern start-ups, is improving and automating how financial services are provided and used. These challenges push our imagination in new ways and encourage unparalleled growth, but, like always, there’s still room for improvement.
FinTech’s Major Challenges
FinTech is a young, relatively new industry that’s continually growing and changing. Like most developing industries, there are of course some growing pains and utilising the latest technology can get a bit bumpy at times.
With new technology, especially disruptive ones, it can be challenging to get early users on board. Companies not only have to convince consumers to trust their brand, but they also have to argue that their product is crucial. New customers and users are often dubious and sceptical.
Many financial companies fight against such feelings by focusing on building trust through the three c’s:
- Customer Experience
Sometimes FinTech companies build trust with their users by creating supportive communities. Whether it’s by speaking on panels or hosting networking events, interacting directly with users can gain their confidence.
Partnering with other similar businesses can also produce outstanding benefits and create a network of like-minded companies that can work together to achieve a specific goal. This network is a positive rather than a negative factor and can help grow individual businesses. Eventually, traditional banks will hopefully jump on board and unite with FinTech firms to better serve customers.
You need to create an online experience for customers that’s perfect, clear, authentic, and informative. The primary goal here is to provide greater transparency to build positive, lasting relationships.
The more transparent and honest you are, the more likely customers will find your brand comforting. For example, aligning with larger organisations, governments and creating social proof can add a human touch to your company.
Customer testimonials, videos and thought-leadership content (podcasts, videos, or written text) provide social proof and makes your brand more personable. Which, in turn, makes it easier to connect and build relationships with your audience.
Transforming the finance industry is certainly not an easy task. One of the biggest barriers to building trust is to make sure you communicate with customers, despite the lack of face-to-face interactions. FinTech companies must be concise without being boring, clear without eliminating crucial information, and transparent yet not intimidating to meet customer’s needs.
It’s also important to remember to not forget about the human element. For example, employ real people in customer service (not just chatbots) and provide a number that customers can call when they just want to talk to a human.
Also, make sure it’s easy for your audience to find the information they’re looking for. For example, streamline your website’s User Experience (UX) and User Interface (UI) and keep online content original, relevant and interesting.
As the Brexit deadline looms in the not so near future, FinTech companies will need to prepare for the possibilities of leaving the EU without a deal. London is currently the European capital of FinTech, but this could change.
If it becomes harder for FinTech companies to recruit new talent or prevent startups from accessing capital, cities like Paris or Rome could vie for the title. The UK FinTech industry will also, undoubtedly, be impacted by new trade regulations.
In the case of a no-deal Brexit, the UK would need to fall back on World Trade Organisation (WTO) regulations. These regulations stop us from providing favourable trade deals to EU companies without extending these same opportunities to all WTO members — creating further barriers with our EU neighbours.
However, on the flip side, it’s not all doom and gloom. Research from PWC shows that the UK FinTech industry has progressed, even after the Brexit vote. London has already built strong relationships with non-EU countries like China, South Korea, Singapore, India and Australia which could open up new, exciting opportunities for FinTech firms.
Warning! Cybercriminals on the Prowl
With one hacker attack happening on average every 39 seconds, fighting off cybercriminals is a daily responsibility for FinTechs.
With great power, comes great responsibility.
Like superheroes, FinTechs, given the sensitive nature of their data, are on the front line for protecting customers’ data and making sure justice prevails.
As such, FinTechs need to spend more time and money to make sure they have the best defenses against attacks and can appropriately protect their data lakes. By 2024, cybersecurity spending is expected to increase to $223.7 billion.
While you might not have massive cybersecurity budgets, it’s still important to take steps to safeguard against attack. Frequently assess your current protection methods and find ways to reduce the risk. For example, you might consider a tactic like ‘moving target defence’ (MTD). MTD frustrates cybercriminals by constantly dodging attacks and makes it difficult for them to penetrate your fortress.
Making Advances in UK Fintech Regulations
As FinTech companies operate between the financial and technology sectors, they’re often subject to many strict regulations.
Playing a game with strict rules isn’t new for traditional financial institutions and they’re well-equipped with entire risk teams devoted to keeping them compliant. However, smaller FinTech companies often operate with fewer resources, so risk and compliance may come down to a single team member, which can be a major stress.
Within such a situation, it’s difficult to push the boundaries and bring innovative ideas to market. Once you have an idea for a product or brand, it’s quite a lengthy, time-consuming process to become regulated and get government sign-off. As you expand internationally, this opens a whole new can of worms with different global, regional and national regulations coming into force.
For example, one of the biggest rule changes that impacted all UK businesses, including FinTech, are the new GDPR regulations that came into force in May 2018.
GDPR regulates how companies process and store EU citizen’s personal information. While the GDPR is nothing new, companies are just starting to pay attention as large organisations like British Airlines and Marriott received fines totalling £300 million.
As such, large corporations have had to invest significant time and money to make sure they comply with data security and financial laws.
Global expansion also comes with an enhanced risk of cybersecurity threats, as we explored earlier, and money laundering.
However, the UK government is considerably aware of this challenge and have already promised to create an environment that supports and encourages innovation. The Financial Conduct Authority (FCA) has also recently launched Project Innovate to investigate the possibility of a regulatory sandbox. They’ve also identified opportunities for “regtech,” a tech tool to help financial services firms access information about collaborating with regulators.
Working directly with the authorities is a good way to overcome this hurdle as FinTechs can trial new ideas in a regulatory ‘sandbox.’ Before going live with a product or idea, testing it can reveal security weaknesses and help ensure it’s actually compliant with the latest regulations.
We love FinTech because it’s always on the go. Whether it’s adapting to GDPR, embracing cryptocurrency or fighting cybercrime, we’re always kept on our toes. If you’re looking for a marketing partner to help you take your brand to new heights, check out our services or sign-up for our blog to stay up-to-date on the latest insights.
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