Demystifying Digital Transformation in FinTech

Fintech startups are modernizing how consumers access their financial data. With regulators worldwide embracing open banking, banks and other financial firms should look closely at their APIs to ensure quality and consistency. The term fintech was coined in recent years to refer to Financial Technology.

Written by TAFF Inc 23 Sep 2022

The Coronavirus pandemic has forced businesses worldwide to switch to digital transformation in a much rapid manner to serve clients efficiently. 

According to a Binder Dijker Otte report, 97% of financial businesses are undergoing digital transformation right now to thrive and succeed in their business. The rapid change can largely be attributed to fast growing use of mobile technology. People are more comfortable in using their mobile applications to conduct financial transactions instead of walking to a bank with physical papers in hand. Here are some stats that show the speed at which the FinTech industry is growing.

– According to a report by Statista, by the end of 2022, 65.3% of the US population are set to use digital banking, whereas this number stood at 61% in 2018.

– A Forbes survey indicates that only 14% of banks are halfway through their digital transformation process and have already deployed machine learning tools to enrich their FinTech channel.

– According to a research report by Meticulous Market Research, the digital transformation industry is poised to reach $3.3 trillion by 2025 with an annual growth rate of 23%.

Here are some of the challenges faced by FinTech industry,

Data Security and Privacy

The Fintech industry is dealing with people’s financial data every day and data security has to be one of their top most priorities. The moment you take traditional financial data online, it is prone to security risks and FinTech companies should be prepared and should have in place topmost security protocol to prevent any security lapse and also protect data privacy. 

Regulatory Compliance

This is another area which is giving nightmares to fintech startups. Fintech is relatively a new business area and the regulations are still evolving each day. These fintech companies should be prepared to face constant changes in regulations and be ready to complain as and when the need arises.

Customer Experience Expectations

This is the most significant challenge faced by any Fintech company. People will tend to switch to a player who offers the best customer experience. The company should strike a balance between customer experience and the amount of data they ask them. The mobile application should work seamlessly with high security at all times.

Benefits of digital transformation in financial services

Greater lending flexibility

The traditional lending companies will always have a physical barrier and hence their growth will be slow and they cannot scale rapidly even though there is a growing demand. Legacy systems on the other hand are way too expensive and not so flexible. Modern cloud based API FinTech companies have integrated with the current financial systems and their growth is extraordinary. These companies can issue a loan in a matter of minutes without any human intervention. The mobile app can get the user data and analyze their credit score and authorize the loan limit automatically. With such great lending flexibility these companies can easily scale new heights in a short period of time.

Simplifying complexities

The whole purpose of digital transformation is to simplify a complex process and make it more customer friendly. The feature-rich mobile applications developed by Fintech companies are not only highly-secure but also highly customer centric in nature. Unlike a traditional lending agency that will burden the user by demanding multiple sets of documents, a Fintech app will get some basic data from the user and automatically fetch all the necessary documents making it as simple as possible for the user. With one mobile application, these companies can offer multiple financial products like loans, insurance, investments, all in one platform.

Greater customer satisfaction 

A global business survey indicates that 96% of customers globally prefer good customer service as one of the primary factors while choosing a brand. The Fintech mobile apps make use of IoT and AI to offer a rich customer experience. 

Channelling digital fintech offerings

As mentioned-above, the new Fintech companies have understood the needs of the modern customers and are offering multiple financial products using their mobile application. The pandemic forced people to pay using their digital wallet more often and cash slowly became obsolete. These Fintech firms are not only offering multiple products but also launching new and innovative financial products at regular intervals. 

Processing data for operational efficiency 

The Fintech applications make use of real time video verification using mobile cameras to verify users. Since all the data collected by these apps are fully verified and available in real-time, they can be further used by financial consultants to offer highly customized financial products. With data analytics, these companies can offer tailor-made solutions for each customer with a high level of personalization.

Total compliance and security

Since these companies use APIs for integrating with other platforms, security is automatically inbuilt. APIs are highly secure and follow a strict protocol as and when used. Since these companies are dealing in financial data, security is of utmost importance. It is simple to edit or add new functionalities to the mobile apps and hence these companies can make changes to regulatory compliance easily. 

What does the future hold for fintech? 

Like any other sector that got affected by the pandemic, the financial industry came out to be the winner. Instead of just focusing on the digital transformation of the traditional lending process, the Fintech industry has gone ahead and used innovation to offer highly scalable and secure financial products.

Blockchain-enabled transactions

Blockchain is a technology that has revolutionized the crypto world and banking sector in recent years. Fintech companies have understood the importance of blockchain technology and have been the early adopter of blockchain-enabled transactions. This innovative technology is not only faster but also highly secure and offers complete data privacy. Investors worldwide are taking note of Fintech companies that are focussing on Blockchain technology as a growth driver. Some of the shining success stories of Blockchain technology are DeFis, NFT assets, Ethereum, etc. 

Mobile-first and mobile-only banks

According to a Fidelity National Information Services (FIS) report, the new mobile banking registrations increased by 200% in April, 2020 when the first lockdown was announced. Now we see many new banks coming into picture that are 100% mobile centric. They don’t have a walk-in physical branch, all the transactions right from account opening happens through their mobile app. Such mobile-only banks are seeing a good traction among the millennials. Some of the standout examples are Digibank by DBS, Simple in the USA and Atom Bank in the UK.

Buy Now Pay Later (BNPL) services

Just a couple of years ago, only those who had access to credit cards could purchase products using the EMI model. Gradually these fintech companies started introducing EMI options for Debit cards too. Then this was extended to the Buy Now Pay Later model which has witnessed a rapid success. Customers can purchase a product online and while checking out, they can just opt for making payment one month later or paying in multiple installments. Such an automated and seamless credit option makes this a first choice for customers. This is made possible with AI driven Fintech apps.

Using RPA for streamlining operations

With the use of Artificial Intelligence, the modern Fintech applications can automatically read through customer requirements and come up with a fully AI-based portfolio management system. It can suggest various investment options based on the risk appetite of the user without any financial consultant intervention. Such automations can make financial apps attain more users at a rapid pace.

Growing enterprise agility

The 2008 financial crisis in the USA had an enormous impact on financial institutions globally. This has forced the Global financial institutions to be more agile and be ready to change as and when a crisis looms. This is made possible only with highly organized data which is collected daily using the Fintech mobile apps. Such an enormous amount of highly verified data will enable these companies to stay ahead of any kind of financial crisis.

Wrapping Up:

The role of AI, IoT, and RPA is invincible for today’s finance companies as their customers look for instant solutions. It is promising to see CFOs embrace new technologies for digitally transforming their financial institutions, it is important that they hire the right team to implement the same. Not only the right team, but also selecting the most suitable technology and tools will result in success. This is where TAFF comes into picture. We’ve enabled multiple financial firms to launch their Fintech mobile applications and scale their business in no time. We will be glad to partner with you to guide you in your transformational journey using the latest Fintech technologies as we stay updated.

Written by TAFF Inc TAFF Inc is a global leader and the fastest growing next-generation IT services provider. We create customized digital solutions that help brands in transforming their vision into innovative digital experiences. With complete customer satisfaction in mind, we are extremely dedicated to developing apps that strictly meet the business requirements and catering a wide spectrum of projects.