While the coronavirus pandemic has been a difficult time for everyone in terms of safeguarding our health and learning to live with restricted social freedoms, it has undoubtedly afforded us an opportunity to revolutionise the way we work.
Fintech companies are at the forefront of these changes, but disrupting an industry is far from plain sailing, and there are plenty of challenges that need to be tackled this year…
One of the biggest upheavals for UK businesses, including Fintech companies, has been the introduction of the EU’s General Data Protection Regulation (GDPR), with financial firms both new and old having to invest significant time and resources to ensure that they comply with the new laws.
And GDPR is just one of the many regulatory hurdles faced by the financial sector, which (following the crash in 2008) has seen stringent rules imposed on how it’s allowed to operate.
While traditional financial institutions often have whole teams to deal with these hurdles, with smaller Fintech start-ups the burden of compliance can often fall onto a single brave soul who has to shoulder the burden of making sure the company is adhering to all the regulations.
With varied global regulatory environments to contend with, this can prove to be a major headache, especially when regulations fail to keep pace with changes in technology, leaving many start-ups operating in a grey area.
So what can Fintech firms do to avoid running afoul of regularity authorities?
Well, working with the authorities themselves is definitely a good place to start, which can be achieved by getting involved in a regulatory ‘sandbox’.
Some regulators have also begun sanctioning the temporary loosening of restrictions, allowing financial organizations to test new ideas and reducing the initial hurdles faced by start-ups.
However, you should also be ready to scale your compliance team according to your growth and consider pooling resources with other Fintech companies to share some of the burden.
Fending off cyber-attacks in one of the greatest challenges faced by businesses and governments around the world, and given the sensitive nature of the client data they hold, they’re a serious concern for Fintech firms.
With cybercriminals launching more sophisticated and frequent attacks, the number of major data breaches looks set to soar in 2018.
This has seen organisations devote ever more time and money in an attempt to thwart these attacks, with businesses spending an average of $11.7m on cybersecurity in 2017.
Of course not every Fintech company has that kind of money to throw at the problem. So what can you do to minimise your exposure to cyber-attacks and keep client data safe while keeping ever spiralling costs down?
Well, with traditional cybersecurity methods becoming unsustainable, you may need to reassess your approach to protecting yourself and your clients from cybercriminals.
To this end it may be time to consider deploying dynamic security solutions such as a ‘Moving Target Defence’ (MTD).
This method helps to frustrate attacks by continually shifting the points of attack and robbing hackers of the static targets they’re familiar with breaching.
MTD has already been deployed by the US Department of Homeland Security as well as major European banks and many more business are expected to follow in 2018.
Fintech is defined by its ability to disrupt the financial sector and upset the status quo, but this may not always be for the better.
Retaining the human touch
One key area in which Fintech firms can fall behind traditional financial companies is through the absence of the ‘human touch’, with their operating models often leaving clients to feel like they are dealing with some faceless entity.
And with the use of AI and machine learning on the rise this issue only looks to become more prevalent.
This can leave many Fintech start-ups struggling to persuade clients, particularly older clients, to abandon their traditional banks.
Furthermore the lack of a ‘human touch’ touch can have disastrous consequences if your company relies too much on technology – just look at TSB’s recent IT meltdown and how it left thousands of customers without access to their accounts.
But what steps can Fintech companies take in order to avoid becoming the soulless financial institutions they set out to beat?
For starters, keeping your customers’ needs and experience at the heart of every new technology you adopt should be paramount. The aim of the game is always to make things easier for the consumer and to offer them a level of service and support they wouldn’t get elsewhere.
Being able to pick up the phone and speak to a real person is an essential selling point for some consumers, so Fintech firms should be prepared to cater for this.
Cost considerations really do come into play here, and for many businesses offering customers a personal service isn’t always practical. But ensuring that you offer at least some level of direct engagement and that you have a dedicated team to support customers when something goes wrong helps lead to a more seamless customer journey.
While the road ahead will not always be easy when it comes to Fintech, forward planning and constant research can help companies overcome the obstacles!