The year 2022 continues to witness many exciting new trends and opportunities in the fintech space, legal tech, and regulatory space from innovations in risk, payments to the use of AI and machine learning to the adoption of blockchain technology.
Fintech and business tech enabling leaders continue to be occupied with creating unique solutions and scaling existing ones to meet the rising demands of the evolving industry. As we enter the second half of the year closes, regulatory and fintech leaders are armed to meet a new phase of challenges and opportunities across compliance regulations, fast-growing technology, operational resilience, and cybersecurity. Michael Brown and Steven Paul share their perspectives. Read on
Hot Industry Trends and Opportunities in Fintech
Fintech is a rapidly evolving field with the potential of disrupting the financial sector as well as the global economy. The future of fintech will include an endless number of bright opportunities that will help the industry grow at an astonishing rate in the near future.
Blockchain Technology
Blockchain technology has not even remotely reached its true potential and leaders can expect groundbreaking opportunities and development to appear in this decade. Non-fungible tokens (NFTs) and decentralized finance (DF) are just two such aspects that will be changing the financial world and it is difficult to predict what new technologies will erupt in this area in the coming years.
Invisible Payments
Today’s customers expect a seamless shopping experience, one that is not hindered by specific transaction- or payment-oriented interactions. The current trends now dictate that single-purpose payment instrument and check-out interactions be removed and replaced by innovative new ways for customers to make payments in a faster and more convenient way without interfering with their shopping.
Augmented and Virtual Reality
People are now jumping on the bandwagon of stock investments and currency trading through AR and VR technology. These offer them an immersive experience by enabling them to monitor the movement of the market in real time and making more informed and quicker investment decisions. The AR and VR industry is expected to exceed $80 billion by 2025 and will play a pivotal role in tech projects like grand-scale simulations like Oculus and creating a metaverse.
Artificial Intelligence and Machine Learning
AI and ML is proving to be indispensable when it comes to forecast, big data management, risk assessment, automation, algorithm trading, fraud detection, and many other applications. One of the most popular trends in the area is that of roboadvisors, which can independently manage your investments and deliver personalized recommendations for financial investments suited to your unique needs through the use of cognitive computer technology.
The above four fintech areas have barely scratched the surface of what the fintech industry is set to offer leaders in the coming years. However, even these few areas are experiencing challenges, including increased regulatory demands.
Increased Regulatory Demands
Since fintech is a critical sector with a potentially higher risk, it is heavily regulated with new compliance regulations. Every country has dozens and dozens of laws that every bank needs to comply with and if you work for an international financial agent, the legal framework becomes even more complex and intricate.
For example, currently regulatory compliance authorities around the world are both exploring artificial intelligence and machine learning to prevent financial instability and deliver positive outcomes to customers.
Fintech firms are evolving at an extremely fast rate and it is important for them to be up to speed on compliance programs and government standards. They need to have answers to questions like who owns the risk and compliance data, does it provide a fair representation of the relevant aspect, how timely it is, and other governance questions.
Firms need to have robust processed that allows them to actively manage and mitigate compliance risks and evaluate the environment for more emerging risks as well as provide proof of their regulatory change processes.
Operational Resilience Demands
Financial regulatory authorities are also bringing in increasing operational resilience requirements post-pandemic. Fintech companies that do not have a physical office may feel they have an advantage over brick-and-mortar companies; however, they face a different set of challenges as well.
For example, in the event of a breakdown of their online services, an online fintech company will not have any physical branches to redirect its customer to.
Some regulatory authorities are even asking fintech firms to take into account the experience of vulnerable customers into their operational resilience processes. In addition, during the pandemic lockdown, it fast became evident to regulators that many compliance and risk management programs were overly reliant on manual processes like documents and emails on a shared drive, and thus has low operational resilience.
In the near future, fintech and traditional financial agencies can expect considerable focus on the resilience of their operational processes.
Challenges in Fintech and How Leaders are Navigating Them
Aside from increased regulatory compliance, fintech leaders are also experiencing a number of other challenges and coming up with innovative solutions to tackle them:
Creating Personalized Solutions
The demand for personalization is true for financial services as well as customers increasingly demand customized fintech solutions tailored to meet their needs and appreciate the various communication channels they are given to get in touch with their services.
Cookie-cutter software is no longer enough to meet the needs for personal experiences. Fintech leaders need to leverage cutting-edge fintech solutions that offer them insight into customer behaviors, interests, demographics, and activities so that they can create highly personalized solutions uniquely suited to a particular client.
Ensuring Robust Cybersecurity
Financial institutions involve money so the risk of malicious perpetrators is particularly higher than other industries. As the number of financial operations and technologies continue to expand, cybercriminal continue to evolve and intensify their unscrupulous practices, determining to attack banks and other organizations every second.
The only way financial organizations can reduce the risk of cyberattacks is to double their security efforts and improve their security posture. Implementation of firewall, antimalware, access control, two-factor authentication, data encryption, intrusion detection, behavioral analysis, software updates and real-time security alerts are just a few of the measures a fintech firm can take to protect its data and transactions.
Acquiring Tech Expertise
The field of fintech is evolving at an unprecedented rate and even new-age leaders find it hard to keep up with the pace of the innovative new technologies, customer preferences, and services landscape. This is particularly true for fintech mobile apps that are fast becoming one of the most covered products by the population of the digital age.
As a fintech leader, you need to hire from an international pool of applicants so that you can leverage from their diverse backgrounds and experiences. If you are unable to maintain an in-house IT team, outsourcing is a good alternative that can help you get the relevant skills and experience in the field that can help you deliver world-class fintech solutions at competitive rates.
Bottom Line
The fintech sector is undergoing a transformative revolution in the wake of the pandemic. Fintech innovations are likely to facilitate the workflow of financial institutions and enhance the quality of customer service if they are successful in counteracting the headwinds they will face in 2022.
About the authors
Michael has 30 years of banking experience including expertise in Technology Risk, IT Audit and Data Protection Law. Operated a successful consultancy firm for over 10 years servicing major financial institutions in London, Edinburgh & Toronto.
Steven has over two decades of international experience working for high growth firms companies across financial services, and diverse corporate sectors in leadership and consultancy roles with expertise operations, strategic alignment, change, capability building and scaling businesses
