Top 8 challenges in Fintech in 2024 | EPAM Startups and SMEs (2024)

Since the COVID-19 pandemic, the fintech market has seen tremendous growth, which will be worth $305.7 billion by 2023.

Although the industry is constantly growing, there are still many fintech challenges that need to be solved. Below you will find the main problems in fintech, their solutions and modern opportunities.

The global number of fintech startups was already25,000+ by the end of 2021. However, not everyone has made the move and is still there. The challenges in fintech and missed opportunities are simply too great for some. Let's take a closer look at that.

Fintech: ‘ballon’ of ‘bubbel’?

Given the growing number of startups and investments, the fintech industry is more likely to be considered a “bubble.” Investors decide whether to finance a company based on its long-term capabilities. That's why they approach the subject with thorough research.

For example, the total number of registered investments in Europegrows every year. Only 1,847 investments were made in 2015, while 8,409 were made in 2022. This is evidence of the growing number of opportunities and investors willing to support them.

New technologies such asblockchainMachine learning, artificial intelligence and Web 3.0 are driving the sector forward. They bring new solutions to the market and set new standards. Therefore, these solutions provide great opportunities for fintech startups to compete with tech giants. However, there are plenty of challenges.

To attract venture capital

Venture capital is one of the most important elements that makes a startup grow. But despite the increased interest in the sector, attracting the right investors remains a challenge.

Potential venture investors typically have several questions during the due diligence process:

• What problems does the product solve?
• What are the potential risks for the company?
• What is the market opportunity?
• Why do the founders think the product will be successful?
• How is the investment capital used to achieve the product's objectives?

Because competition is high and investors are aware of the financial benefits, convincing them requires a detailed financial plan, a long-term strategy and validation of the idea. Validation can be performed based on existing statistics or unique user surveys.

Finding a good investor

Having a good investor is beneficial in every way. The startup can receive sufficient financing to realize all plans, additional expertise in the field and retain its freedom of development, regardless of whether it wantscreate a budget appor a product in other fintech domains.

Here's where a fintech startup can find a big investor:

• Kickstarter, Angellist, Gust
• Business summits and similar networking events
• Startup accelerators

The next problem is keeping the investor's attention. There are thousands of startups waiting for funding, so standing out from the crowd is mandatory. Preparing a comprehensive pitch deck presentation will provide the investor with all the necessary information to make a decision.

Here's what to include in a pitch deck presentation:

• Brief company overview
• The problem and its solution
• Market opportunities and target group
• Expected business model
• Financial estimates

A good strategy is to introduce yourself as an investor. Think about any questions you may have as you study your project. Show them and provide an answer in your presentation.

Competes with major brands

A modern startup must compete with financial powerhouses such as PayPal and technology giants such as Amazon.

If the startup wants to be a B2C solution, it must find a market where tech giants are weakest. This may be an area where consumers are not getting enough deals or are dissatisfied with current services.

In the B2B segment, the start-up has to solve a significant problemdigital financial transformationto be noticed. It can cover potential pain points such as large expenses, fines from regulators or even ease of use. Either option is great, as long as it meets the needs of the business.

We have researched the main challenges in the fintech industry and selected the most important ones. Many established companies struggle to deal with this, which is why we will also provide a solution for every company.

Data security

There were 1,862 data breaches with an average cost of$4.24 millionin 2021. This is a new all-time high, which raises even greater concernscyber security in the banking sector.

Companies must be aware that they risk losing not only their reputation, but also their money.

To prevent a potential breach, you must:build a fintech appwhich includes these features:

• Two-factor authentication
• Biometric authentication
• 256-bit AES encryption
• Notifications of all actions

Performing regular penetration testing is a good way to ensure hackers don't disrupt your solution. You must take at least one test per year. Testing must also be performed after every new update and integration.

Regulatory compliance

One of the challenges in fintech is the fact that this high-risk industry is beset by government regulations. Companies must comply with a number of laws, such as GDPR, GLBA, Wiretapping Act, Anti-Money Laundering Act and many others.

There are several ways to comply with this. Here's what you can do:

• Hire legal counsel for guidance
• Hire a dedicated person or department to keep track of regulatory updates

Both options are feasible. The only differences are the collaboration and pricing models. Hiring a lawyer is much cheaper than paying a fine when the maximum penalty of the GDPR has been reached20 million euros.

Lack of technical expertise

Many banks and financial companies use outdated software or struggle to innovate in mobile banking. This is a significant problem because their apps are not user-friendly and intuitive. Although we can currently witness a constant shift in focus to provide a better user experience, the process is still long.

The following features are must-haves for everyonemobile financial app:

• A top-notch UI and UX
• Extensive data visualization
• Payments with QR code
• NFC support

You can usefintech application development servicesto have a team of top experts work on your project. It allows you to implement any feature to compete with the leading players in the market.

User retention and user experience

Keeping users engaged is one of the most common fintech challenges. Low retention means fewer users, resulting in lower income.

It is possible to increase user retention by providing a better experience. Here are some examples:

• Gamification and a reward system
• Custom push recommendations
• Easy to use UI/UX

You can monitor your competitors' approaches to see how they impact the user experience. Seeing different methods in practice will help you choose the best options for your startup.

Service adjustment

Companies should not overlook the importance of personalization.

Here are some ways to customize your fintech software:

• Push notifications with usernames, topics of interest and geo-based data
• Filter by services and products the user was previously interested in

Personalization usually uses AI to determine a consumer's interests. Artificial intelligence is one of the most in demandfintech development servicesnow, so it's worth considering.

The number of options is large, so we picked the five most prominent technologies to use.

Blockchain

A recent forecast predicts that the global blockchain market is expected to reach size$22.46 billionin 2026 and growing at a CAGR of 72.99%.

The technology removes third parties from transactions, provides a decentralized network and creates digital ledgers. These features address the fintech challenges described above.

Artificial intelligence

AI has been used in fintech for quite some time. In most cases it was implemented for real-time fraud detection and financial analysis.

Here's what you can do with itAI in fintech:

• Advanced cybersecurity and suspicious activity analysis
• Improved customer experience through chatbots and personalized services
• Risk score profiling and more

Machine learning

Machine learning is one of the most important fintech opportunities and challenges in terms of implementation. It helps AI adapt to new situations and identify patterns.

Here's how machine learning is being used to solve fintech problems:

• More loan approvals with less risk
• Detection of fraudulent activities
• Legal compliance analysis
• Price prediction for stock trading etc.

Big data

Big data helps financial data companies get accurate information about their customers, adjust strategies and personalize UX.

Here's how big data is being used to mitigate the big problems facing fintech:

• Creation of detailed user portraits for customized services and marketing strategies
• Improved risk assessment by analyzing multiple sources
• Accurate development of fraud detection systems

Big data development servicescan help you get the most out of this technology. Combined with AI and ML, it forms a strong fintech ecosystem.

Web3

Web3 is a new blockchain-based version of the internet with an emphasis on decentralization, AI, ML, and better user experience.

This is how Web3 will change the fintech industry:

• Improved data management for users
• Get access to all information about activities such as BNPL or loans
• Personal and tailor-made content
• Process automation for faster payments
• Minimized errors and suspensions

It will take centuries for traditional banking systems to adopt the new concept. Web3 andbig data en fintechhas every chance of success.

The number of startups is constantly growing, but only the best are conquering the market. We have selected the five leading startups that are turning challenges in fintech into opportunities and winning.

GoHenry

GoHenry is a payment card provider for children aged 6 to 18. The company has an application that aims to develop money skills among the younger generation. Children can learn how to get pocket money, save money, spend responsibly and donate to charity.

Here are the key points for this company:

• Type of startup:an educational money management platform
• Search growth over five years:866%
• Judgement:$250-500 million.

GoHenry's application has an average rating of 4.3 out of 5 based on Play Market and App Store reviews. It has been downloaded more than 1 million times worldwide.

M1 Finance

M1 Finance is an automated investment platform that helps people invest, borrow and spend money. The company uses AI and ML technologies for its predictions.

Here are the key points for this company:

• Type of startup:an automated investment platform
• Search growth over five years:1.600 %
• Judgement:$1.45 billion.

M1's application has an average rating of 4.5 out of 5 based on the reviews in Play Market and App Store. It has been downloaded more than 500,000 times worldwide.

Figure

Figur is a blockchain-powered service for individual users and large companies. The company focuses on various types of loans, payment solutions, transaction services and others.

Here are the key points for this company:

• Type of startup:a provider of loans and financial transactions
• Search growth over five years:325%
• Judgement:$3.2 billion.

Figures application has an average rating of 3.5 out of 5 based on the reviews in the App Store. It has received more than 5,000 downloads on the Play Market.

Treasuryspring

Treasuryspring is a service that helps investors find the most cost-effective investment opportunities based on various factors. All data is accessible via a web portal.

Here are the key points for this company:

• Type of startup:in investeringshjælpstjeneste
• Search growth over five years:1.500 %
• Total subsidy amount:$43.5 million.

Currently, Treasuryspring does not have any mobile applications. The company provides its services through a browser-based application.

Revolution

Revolut is a service designed as an alternative to the traditional banking system. This involves credit cards, payments, investments, currency exchange, insurance and many other functions.

Here are the key points for this company:

• Type of startup:a provider of banking services
• Search growth over five years:1,257%
• Judgement:$33 billion.

Revolut's mobile application has an average rating of 4.6 out of 5 based on the Play Market and App Store reviews. The app has been downloaded more than 10 million times and is ranked number 106 in the 'Finance' section of the App Store.

You may also be interested in the article abouthow to build your own payment gateway.

EPAM's developers have hands-on experience dealing with fintech's biggest challenges. Check out the following case studies to see our solutions.

freeME: a solution to radically change pensions

Glarner Kantonalbank, a Swiss bank, came to EPAM with an idea to radically change the Swiss pension system. The idea was to give users control over how their money is invested, even during the transition. This created freeMe.

EPAM's UX team has done thorough research to create an easy-to-use solution for the target group. The team then built the freeMe application using modern web technologies to provide a rich and intuitive interface. You canRead more about the solution here.

ImageNPay: creating carbon-neutral interactive digital payments

ImageNPay came to EPAM with the idea of ​​creating a digital wallet that could be customized at any time. The main goal was to eliminate the need to issue plastic cards and minimize pollution.

The EPAM team supported the project from the ground up by designing the architecture, creating an SDK, applying business intelligence, achieving PCI DSS certification and completing many other phases. You canRead more about the solution here.

Citi: Transforming Customers' Banking Experience

Citi, one of the leading global banks, organized a huge competition for developers. The idea was to create a breakthrough solution that digitized the banking system and easily integrated it with Citi's platforms. EPAM took up this challenge.

The team at EPAM has developed a solution that helps customers get a personalized experience. At the same time, Citi received a solution that allowed them to gain deeper insight into their customers' data. The bank was so impressed that they decided to integrate our solution into their Smart Branch. You canRead more about the solution here.

The fintech industry has many benefits, challenges and solutions. The main problems are the lack of technical expertise and the complexity of compliance with legislation. However, these challenges can be easily overcome with the use of modern technologies and a reliable onefinancial software developmentpartner.

While the traditional banking system is slowly adopting modern solutions, the process is very time-consuming. Startups have all the potential to capture the lion's share of the market by using blockchain, AI, ML, big data and Web3 to their advantage. The use of innovative technologies is one of the key elements for success.