Fintech is an essential part of modern finance. The traditional understanding of financial operations has changed. Fintech opportunities allow people to enjoy the convenience and speed of managing their financial operations. In addition, it has enormous potential to improve global economic life.
Fintech has opened the way for businesses and individuals to overcome new financial problems caused by social distancing and other government restrictions during the coronavirus pandemic. In spite, being a new tool, Fintech still meets many obstacles. In this article, let’s analyze the main trends and challenges of the Fintech industry in 2021.
Fintech development has targeted some modifications in financial life. As a result, it converted into one of the most luring fields in the modern world. According to Statista, Fintech investments globally increased from $50.8 billion in 2017 to $135.7 billion in 2019.
Fintech has already achieved extraordinary success in the business environment. Moreover, its continuous development leads to new advanced technologies, enhance business models, and more independence in handling financial operations.
Here are some Fintech trends, opportunities, and Challenges that will dominate in 2021.
Artificial Intelligence & Machine Learning
Artificial Intelligence and Machine Learning will resume rising as these technologies help manage large amounts of information and help developers create more efficient Fintech software. What is more, voice technologies powered by AI improve voice assistants, help customers find solutions to everyday questions, and serve as biometric information for payment authorization?
Nowadays, It has become effortless to do money transactions in just 1 minute. However, the task of Fintech developers became more to pay attention to cybercrime. Many Fintech experts believe that biometric security measures can bring Fintech to a significantly new level.
Security in the banking sector is a must thing, and Fintech with Blockchain makes it real. No compromises are made in Fintech development.
In 2021, Fintech experts believe that transactional financial institutions will cooperate more with Fintech companies. Financial institutions are looking forward to an open banking opportunity that allows data networking across banks and Fintech startups.
The term Financial Literacy means that the awareness of the Fintech tools can help improve the client experience. The better people know how to use Fintech tools or services; it becomes easy for them to meet their demands, and those who want to start a Startup can hire Fintech developers for Fintech app development.
Literacy of anything is helpful no matter what, and when it comes to money, people always understand much quicker. Fintech can revolutionize the whole banking system, and there will be many thorough guides who can help you at every stage. Fintech is just related to Traditional banking, with some suitable modifications.
Main Challenges in Fintech
Let’s look into the main challenges in Fintech App Development Services in 2021.
In May 2018, Europe presented a new normative document called the General Data Protection Regulation (GDPR). This set of rules intends to improve the privacy and transparency of personal data for European residents. However, it becomes a significant burden for financial institutions as they have to find a way to comply with all GDPR demands in order not to pay a high penalty.
While large financial companies and Fintech software development companies have numerous experts working on that topic, small Fintech startups cannot afford it. Hence, GDPR compliance generally becomes the cause why small businesses start operating in the shadows.
Cyber-attacks remain a severe concern for Fintech software companies. According to the Financial Conduct Authority (FCA) survey, financial data breaches increased from 25 in 2017 to 145 in 2018. Modern cyberattacks are aimed at theft and try to destroy the system or change it to diminish trust.
Although cybersecurity measures are usually expensive, Fintech software companies should concentrate on the advantages they provide. Cyberattacks lead to high costs on system reestablishment and the loss of public trust that usually can’t be restored.
The major difference between Fintech services and traditional banking is the human touch. While Fintech attempts to introduce improved services with the help of ML and AI, the human component is waning away.
Many people feel uneasy knowing that they are interacting only with machines but not humans. Thus, It becomes challenging for Fintech software development companies to convince people, particularly the elderly, to withdraw from traditional banking and swap to Fintech services.
Adoption of Blockchain
Blockchain integration into Fintech services can enhance financial security and a solution to other common problems. Many Fintech Software development companies already use Blockchain technology in such disruptive areas as fraud management, instant payments, digital currencies, etc.
Blockchain can help in solving issues and also:
- Improved contractual performance due to Smart Contracts
- Improved capital optimization
- Reduced cost of services
- Reduced error handling and reconciliation
- Diverse and stable credit landscape
- Instant settlements
Lack of Expertise
Many countries are still lacking the expertise in Fintech app development services. Traditional banks usually try to follow their websites, offering clients user-unfriendly interfaces. The nuisance of mobile apps leads to low integration of Fintech services and poor customer experience.
Providing Fintech services in those countries can build trust in the people, and then they can start understanding Fintech development. Organizations can form a unique Fintech development team or hire Fintech developers to solve that problem.
Fintech is a growing trend in the banking sector, and it breaks the boundaries of the traditional banking systems as it is quicker and provides innovative and secure solutions, and also it is very highly effective.
The future of Fintech technology depends on the mixture of new technologies such as blockchain, Machine Learning, AI, etc., and the enhancement of cybersecurity measures.
Having solved some current issues, Fintech software companies always face new challenges. Nowadays, to stay on top of the ladder, it becomes essential to meet customer’s technological needs by building user-friendly Fintech applications and complying with a significant number of requirements imposed by world organizations.
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Fintech Kennek raises $12.5M seed round to digitize lending
London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.
According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.
The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:
“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”
The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:
“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”
The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.
The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.
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Fortune 500’s race for generative AI breakthroughs
As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.
Goldman Sachs’ Cautious Approach to Implementing Generative AI
In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.
According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.
One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.
To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.
Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.
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UK seizes web3 opportunity simplifying crypto regulations
As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.
Streamlining Cryptocurrency Regulations for Innovation
To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.
The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.
Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.
The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.
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