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Fintechs aim to challenge traditional financial services thinking with the use of innovative technologies. In doing so, they can often provide a better user experience than entrenched methods. These improvements include speeding up transactions, lowering the number of rejected payments, giving greater insight into finances, and creating more seamless payment processes.
As technology continues to evolve, fintechs can venture well beyond the parameters of solely making payments. New avenues of opportunity have opened up in the fields of authentication, notably in biometrics. As this trend continues, there will be numerous opportunities for fintech developers to expand.
Furthermore, the pandemic has only accelerated fintech growth, as digital payments become more common. This is in parallel with a growing demand for instant transactions. By applying the latest technologies, fintechs can meet both these goals. However, while there are significant opportunities in today’s payment landscape, there are also some key considerations they must be mindful of.
Eclipsing legacy methods
When creating any new solution, it must be better than what it is trying to replace. An abundance of new technologies comes to market, but not all of it brings added value. The challenge for fintechs is to develop solutions that are secure and practical, while tangibly improving on the systems they replace.
The primary advantage fintechs have is that the majority of their employees are technologically skilled and work on cloud-native infrastructure. This means they are not relying on any legacy systems. This allows them to be quicker and far more agile than their counterparts at traditional financial institutions.
The quality of service in the banking market can sometimes be overly complicated, which can lead to declined payments. Any declined payment is a lost sale for the merchant through no fault of their own. Therefore, any solution that minimizes the chances of a payment being declined, while maintaining adequate security, is beneficial to the merchant and end-user. Fintechs can use their digital proficiency to hold an advantage over the legacy systems that incorporate digital infrastructure into an existing framework.
Like all financial institutions, fintechs must abide by a series of regulations and standards. As different use cases all have varying systems and requirements, regulations help guide developers to ensure their solution is secure while also enabling interoperability.
However, regulations are not without their problems. As mentioned before, one of the main advantages fintechs have is their speed and responsiveness. Nevertheless, regulatory bodies often work on much slower timelines than fintechs. This advantage is undercut if regulators do not keep up. If outdated regulations constrict what a fintech can do, it can stunt their ability to innovate.
Therefore, fintechs must be in constant open dialogue with regulators to ensure that they can create the best possible solution with effective security.
Another hurdle for fintechs to overcome is slow user adoption. Customers must trust any payment solution to be willing to use it. Fintechs can provide user-friendly systems that are better and faster than traditional systems, but if they lack user trust they will struggle. This is why solutions often partner with other major players in the payments industry, as brand recognition helps build trust, proliferating adoption.
Fintechs can also build user trust by offering a level of transparency to the payments marketplace that their traditional counterparts cannot. Real-time payments allow users to see the payment being made instantaneously, giving them confidence that the payment has been processed. By creating bank-agnostic and globally interoperable solutions, fintechs can make payments and reconciliation easier for both B2B and B2C transactions, for example.
The need for expertise
The access fintechs have to the consumer market is complex, but a growing understanding between banks, regulators, and innovative fintechs will result in better solutions being rolled out. A collaborative effort can be mutually beneficial while providing the end user with better experiences. One example of this is the European Payments Initiative (EPI), which aims to harmonize the fragmented European payments ecosystem.
As further regulations and initiatives akin to EPI are rolled out, fintechs need to be well supported by technical experts to ensure standards are met without limiting the potential for innovation. Fime provides technical and strategic consultancy to help innovative payment solutions succeed. Learn more about how our consultants can help deliver your fintech solution on our website.
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