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 companies and their customers are looking for easy to use solutions.
In this post we explain what FinTech is, its fundamentals, and discuss the importance of apps in the sector. Whether you are an enterprise or a startup, understanding the industry is of great help in order to deliver great products.
What is FinTech
FinTech is the abbreviation for financial technologies. 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 FinTech 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 where traditional banks have been focusing on, although this is changing.
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 service 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 on 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.
As the 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 app 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.