FinTech is one of the fastest-growing verticals within the app development world. According to The Business Research Company, its market was expected to grow from $127.66 billion in 2018 to $309.98 billion in 2022, and that was before Covid-19 shook the world. Now, experts think that it might grow even further. As a consequence of the acceleration of digital transformation, many financial institutions — and especially their customers — are looking for easy–to–use banking or trading solutions beyond those that were previously regarded as traditional financial norms, such as in-person financial transactions with a bank teller, having a stockbroker process the sale or purchase of shares on the investor’s behalf, or making payments with physical checks.
In this post, we explain what FinTech is, and its fundamentals, and discuss both the importance and variety of apps in the sector. Whether you are an enterprise or a startup company, understanding the FinTech industry and what your target audience’s needs are will help you deliver the innovative products that your customers are searching for and will find beneficial to their daily financial transactions.
Understanding the Services FinTech Can Offer
FinTech is the abbreviation for financial technology. It refers to a set of financial services that can be delivered using technological tools. Although the FinTech ecosystem is a complex one where many elements come into play, users generally come in touch with it through web and mobile apps. This makes digital User Experience (UX) very important for the FinTech industry.
Thanks to the growing market of financial apps, many services are now closer than ever to users. This has obliged many traditional brick-and-mortar banks to adapt themselves. It has also given rise to a whole new world of startups that compete or work hand in hand with banks. In the end, it is users who benefit the most thanks to the possibilities that FinTech allows.
Many products and services can be offered through financial technology platforms. These are some of the most important ones: risk and asset management, transactions, forecasts, insurance, payment gateways, loans, trading, and banking services. Out of these, banking services is probably the one that traditional banking institutions have been focusing on, although this is changing.
Top FinTech Apps and Their Individual Benefits
There is no shortage of FinTech apps these days. From mobile banking apps that let users monitor and manage their accounts to apps that offer users the ability to transfer money to loved ones or pay bills in real-time, there are endless options available for not only financial institutions to take advantage of, but any business that either provides financial services or accepts and/or processes payments.
Below are some of the most popular FinTech apps and how they have transformed the traditional banking industry:
Mobile Banking Apps
Most banks these days offer their customers the convenience of accessing their checking, savings, and investment accounts through mobile banking apps and payment services solutions. Users can monitor their transactions, move funds, schedule payments, and much more without having to visit a physical financial institution.
That being said, some of the hottest trends within the FinTech sector are the use of cryptocurrencies, digital banking, Artificial Intelligence financial algorithms, and the use of blockchain. These digital transactions do not involve the exchange of traditional currencies. Instead, they operate via the exchange of highly secured virtual currency. A user transfers money into a secured, decentralized digital network and then performs their intended transaction by sending cryptocurrency. When receiving funds, the user will convert the cryptocurrency back to standard currency and transfer the funds into their account of choice, if they so desire, or keep the cryptocurrency in their digital bank account.
Mobile Payment Apps
Few things are more convenient than initiating a financial transaction from a smartphone or tablet. One of the largest benefits of FinTech apps is their ability to facilitate the transfer and acceptance of mobile payments. Whether sending money to a friend, employee, or paying a bill, mobile payment apps have revolutionized the way both consumers and businesses transfer and receive funds.
These FinTech apps have enabled customers to both avoid having to take out money to pay someone in person, send checks, and even provide for free payment transfers or minimal fees if the recipient decides to move the funds from their payment apps to their bank accounts instantly. With traditional banking, customers would have to pay a fee if they wanted to cash a check that was issued by a financial institution that they did not have an account with.
Some of the top apps for mobile payments include, but are not limited to:
- Cash App
Many of the aforementioned mobile app payment solutions also offer digital wallet services. A digital wallet enables consumers to use their smartphones to purchase products in-store without having to use their credit or debit cards, provided the store offers the option. Other digital wallet providers include Apple (Apple Pay), Samsung (Samsung Pay), and Google (Google Pay), among others. Stores that offer this service will display a Near-Field Communication symbol (NFC or N-Mark) on their card readers.
If the store does offer mobile pay, once the user links their preferred account to their phone’s payment services platform, they can simply tap their phone against the terminal to make a card-less and contact-less purchase.
Startups and Enterprises
The FinTech sector is a very interesting one because it combines both startups and enterprises in competition and cooperation. Legacy banks have sometimes preferred to forge alliances with startups in order to reach new clients rather than start a war. In other cases, they are opting to compete with them, especially when it comes to their core business units. Even in traditional bank held niches, startups seem to be doing well. It will take a couple of years to see how these trends evolve.
One of the most important niches within the FinTech sector is the Banking as a Service (BaaS) market. This basically encloses traditional bank-offered services in new ways that prioritize users’ needs. Thanks to open banking data, third parties can access users’ financial information, through a fee, to provide financial services. This allows companies to deliver services in ways that would otherwise be impossible, creating a win-win situation for everyone.
FinTech Challenges and Opportunities
As opportunities arise, so do the challenges. FinTech companies are tapping the possibilities of using powerful apps to reach users like never before. This allows them not only to become more efficient and reduce costs, but also to create new sources of revenue. New services are being developed thanks to new technologies, and this trend will most likely keep getting stronger.
In terms of challenges, one of the most important things that FinTech companies are focusing on is security. The digital world is not exempt from theft, so companies need to guarantee users that their resources are safe with them. Additionally, this becomes extremely important in terms of preventing and detecting money laundry. There are high stakes for companies and governments alike in terms of how FinTech security is managed.
In many countries, there is a great deal of opportunity to reach out to individuals that, under normal conditions, would not be considered by the financial system as potential customers. This is particularly true in developing countries, but interesting opportunities also exist for companies to reach out to senior citizens in developed ones.
Probably the most critical aspect that financial companies need to consider is the sector’s regulation. Because the financial sector is crucial for a country’s economy, states need to regulate it properly. FinTech is no exception. However, what the world has seen is that financial innovations move at a faster pace than what states can regulate. This makes it difficult sometimes for the sector to move, but it is definitely not slowing it down.
Many countries have opted for a regulatory technique called sandboxing. This refers to a “pilot” program where a given FinTech services provider or company is allowed to operate at a small scale before going massive. This allows regulators to observe how the market will behave and execute the necessary corrective actions, avoiding irreparable harm to the macroeconomy.
User data is also another aspect that deserves attention. Companies not only need to guarantee secure transaction mechanisms. They should also guarantee users that their personal information is in safe hands. Generating trust is one of the most important things within the industry, particularly for users who are wary of digital technologies.
Regulation can have a great impact on the industry as it defines what can or cannot be done. It is essential that FinTech companies stay up to date with regulations. The best way to do so is to work with a qualified FinTech app development company, particularly one that is familiarized with continuous integration and deployment.
Due to the current crisis, it is yet to be seen how regulations will evolve considering the challenges that many countries have ahead. However, we are expecting an optimistic scenario where the industry will grow in the years to come.
Design a Competitive FinTech App Today
As the financial industry keeps on growing, we expect to see new competitors entering the market. This means that new apps will try to compete for users. Having a world-class mobile banking or web-based FinTech services app that redefines traditional financial trends will be a necessity in order to stay afloat in a highly competitive market. Some companies will have the necessary resources to develop these products in-house, while others, the majority of them, will need to recur to FinTech app development companies.
The best way to guarantee that a FinTech app is successful is by having a qualified partner that knows how the industry works and is able to deliver a top-notch digital product. At Koombea, we have more than 12 years of experience building great apps for the financial sector. Our customers speak well of our capabilities thanks to our custom development methodologies that guarantee reliable, secure, and scalable solutions. Contact us and take your FinTech project to the next level.