• Aleksandra Bondarenko, SEO Content Developer at Wave.video


• 27.02.2023 06:45 pm
#fintech

Many developments and innovations are changing the fintech and banking world. Cashless payments, smartphone apps, and machine learning are a few technologies you can benefit from, along with many more.

Tech advancements continue to shape how financial institutions around the world work. And fintech companies are expanding, building their own footprint in the market.

To succeed in business, you must know the significant challenges and how you can work through them from within your company or with professional help available in an agency directory.

Let's go through the main challenges fintech companies face and how you can avoid them.

System vulnerabilities

Security is essential when dealing with the financial sector, where sensitive and private data are frequent occurrences. Regulators now focus on the vulnerabilities of financial and banking systems and the rising number of security breaches and hacking attacks.

According to statistics, high and critical risks appear in every tenth internet-using web application. Moreover, 46% of online apps deal with vulnerability problems. Data security is challenging because vulnerabilities are much more complex and diverse, affecting fintech and users' money and personal information.

Even though traditional banking systems use CCTVs, security guards, bulletproof doors and glass, and vaults to keep data and valuables safe and secure, hackers manage to breach them and steal sensitive information.

Luckily, fintech solutions can be put in place to increase security. Some include:

• Two-factor authentication
• Data encryption
• Biometric identification
• Real-time alerts and notifications
• AI security analytics
• Routing data in the network.

Digital identities

Smartphone apps and contactless payments are fantastic innovations for users. But they also pose significant risks and challenges for data. Digital IDs should have some key features that assure users of their safety:

• They are trusted and verified – digital identities prove valuable when regulators, authorities, or important stakeholders approve them;
• They are secure – they must have features against theft, loss, corruption, and encryption for data safety;
• They are portable – digital IDs should be just as functional as physical documents.

Ownership of data

Data ownership refers to who can manipulate data in the fintech and banking industries. The regulatory system decides who can create, access, modify, and delete data.

Security roles determine the ownership of data in fintech software solutions. This enables effective management of complicated circumstances involving access credentials and access level. This results in minimized risks concerning third-party system breaches and countless financial and reputational damages.

Third-party service integrations

Third-party service integrations have become an integral part of modern applications because they allow users to see coherence and effective performance throughout their apps, paving the way for product functionality improvement opportunities and competitiveness.

A possible problem with integrating third-party applications into fintech solutions is the security risk. Insufficient security in third-party integrations can harm the fintech industry because it compromises app security and digital security of banking and financial assets. BlueVoyant says that over 93% of companies went through a cybersecurity breach because of weaknesses in their supply chains or third-party applications.

Cloud migration

Financial and banking institutions are adopting more and more cloud computing technologies. These cloud solutions imply increased efficiency and reduced costs, but not all companies can integrate them into their systems.

Fintech cloud migration technologies are open to some stereotypes that can be off-putting for companies:

• Cost estimations – in most cases, companies underestimate cloud migration costs, which leads to budget overruns in departments like third-party services, dependency management, legislation, and re-architecting.
• Data management and security – companies must comply with local regulations concerning encryption, permissions, and secure storage.
• Data confidentiality – companies must continue to work on improving data protection.

Of course, there are different aspects to consider when looking at fintech cloud migrations. Each company should weigh the advantages and disadvantages of such a move before deciding.

Malware attacks

A significant challenge for the fintech and banking industries is the malware attacks that can cripple their infrastructure. Finance and insurance are the industries cybercriminals attack most frequently. It's no surprise because criminals have much more to gain from financial institutions than from other companies.

Companies can suffer reputational and operational damage when they become the target of a ransomware attack. And they lead to financial damage, which, in some cases, can result in severe problems and even bankruptcy.

For business owners, it's a prerogative to keep their fintech companies safe from ransomware attacks.

User retention and experience

Fintech industries rely on consistent users to stay profitable. But they must find ways to balance user experience and security practices. An essential feature to offer your fintech users is a mobile banking app that's both safe and easy to use.

Consider that the more layers of protection you use on your app, the higher the chances are that you will lose some users based on customer experience.

Most customers prefer a simple logging process, not waiting for a message or authorization code they must fill in themselves to access their app.

That's why you must ensure a safe and user-friendly interface. Try to implement a silent mobile verification process that requires you to open your app and sign in, then wait for a few seconds before getting access to your information.

Bonus: solutions for fintech industry risks and challenges

Most business owners look for fintech solutions to software development to incorporate into the financial and banking industries and their workflows.

Adopting secure-by-design mindset

System security concerns are crucial to fintech software development and implementation. The security-by-design mindset is a critical item to introduce to this ecosystem.

It implies investing many resources to create a clear cyberattack defense infrastructure. In turn, it reduces penetration risks and minimizes infrastructure recovery costs.

Protecting sensitive data

Because we're talking about the fintech and banking industries, personal user data must be kept safe. Only authorized personnel should have access to this information.

Fintech companies must constantly update their security protocols to stay up to date with new vulnerabilities and ensure user data is always safe.

Data encryption is one of the most sought-after measures for protecting sensitive data. It transforms data into formats readable only by people with access to a decryption key.

Using software composition analysis

Software composition analysis is the name of an automated process that works by identifying open-source software in a codebase. Simply put, it allows companies to evaluate their system security, code compliance, and quality quickly.

Companies in the fintech sector usually use this system to identify problems and brainstorm actions to remediate them proactively. By extension, it minimizes or entirely avoids financial, operational, and reputational impacts on companies.

Final thoughts

There are many things to consider when working in fintech and the banking industry, which is why some new companies fail.

Nevertheless, being aware of the potential risks and problems in fintech development and selecting an expert technical supplier can considerably boost the possibilities of releasing a solid and effective software solution that works perfectly for your company's demands and goals.