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7 Challenges Facing Fintech Startup and Their Solutions

By Muhammad Asad

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7 Challenges Facing Fintech Startup and Their Solutions 101
Source: Adobe/dragomirescu

FinTech startups seek to provide the consumer as well as businesses varied options when it comes to money management. Notwithstanding the various benefits associated with this revolution in the field of finance, some challenges have been associated with fintech startups. These challenges are most times not peculiar to a particular startup but a common experience among different fintech startups.

Whether fintech startups are bound to succeed is out of the question because fintech seems to be the way to go in the coming days. This success has however not eliminated the possibilities of challenges that must be taken care of for it to succeed. Let's quickly take a sneak peek at some of the challenges starring fintech startups in the face and possible solutions to them.

#1.Difficulty in implementing Artificial Intelligence and Big data integration.

So many experts in the field of finance view Artificial Intelligence and Big data as the big break in the field of finance. This view is a result of the belief that Artificial Intelligence will strengthen the interaction between financial institutions and their customers. It will also make the gathering of information from the customers more seamless. Big data on the other hand makes it possible for businesses to collate, manage and organize that pertains to a user. Some of the user's information that Big data helps businesses to collect includes social status, user name, in-app activities, and financial behaviors or activities.

All these details are extremely vital to a bank's operations. Banks most times use this information to arrive at certain decisions like credit ratings for customers and providing other services that may be considered high-risk. A combination of Artificial Intelligence and Big data is a formidable tool that will help financial institutions in no small way. Using this tool, fraud can be automatically detected and breached, transactions effectively and efficiently managed and risks analyzed.

These systems are not that easy to integrate. It becomes more challenging when the fintech startup is not starting on a clean slate but has an existing system. Integrating these high-end technologies with these systems may witness technical hitches. Even when a fintech startup succeeds in integrating these technologies, it may have to do a total overhaul of the business to adapt.

Solution

The best way to tackle this challenge is to engage the services of an AI and big data expert who will assess your business and know the best way to integrate those technologies.

#2. Integrating Blockchain

A lot of fintech apps areanchored on blockchain. A blockchain plays an oversight role and ensures that transactions are not altered after being initiated. Since most fintech transactions are in stages, blockchain will help to track the transactions at each stage of implementation. For many fintech startups, integrating this system can be quite challenging because it requires a professional who understands how things work.

Solution

Ensure you engage the services of a blockchain expert to help set things up. Since blockchain is one of the newest kids in the block, it has received its fair share of suspicion from traditional banking institutions and the government. Ensure you comply with the law so as not to run into trouble with the authorities.

#3. Challenges in maintaining compliance with the regulations of the government.

One of the sectors that easily comes under serious checks and scrutiny from the government is the financial sector. This is not surprising as any disruption in this sector can affect the whole economy. Even if the fintech software you are currently using does not involve the use of blockchain, you still need to pay attention to these regulations and policies.

Solution

Stay abreast with laws governing the use of fintech software. Run a quick check on your software and its processes to ensure that you are legally compliant. If you are not so sure of which law covers this, hire a consultant in the legal field to walk you through it. Also, remember that changes can occur in these laws from time to time. Ensure you make the necessary adjustments when this happens.

#4.Limited level of tech expertise.

Many developing countries of the world still practice traditional finance. A large number of financial institutions in these countries are unable to set up a good mobile banking platform that users can conveniently use. Lack of expertise in this area has led to the development of mobile apps that are not user-friendly. There are a lot of possibilities to be explored using fintech software but these things will only remain possibilities without experts to explore these.

Solution

Set up your team of developers that will be fully involved in creating your mobile apps. This team should be made up of people who have current and relevant knowledge of the newest developments in tech and how to keep improving on the services you render. If as a fintech startup, you don't have the funds to set up a development team, outsource it. There are so many tech service providers that offer such services to financial institutions. You can also consider hiring a consultant intermittently to bring your team up to par with trends in this field.

#5.Insecurity and trust issues

Just like every other innovation, people tend to show distrust for anything that is beyond what they are used to. When it comes to fintech, security is a big concern, and rightly so too. This is because unlike the traditional financial institutions that make use of cameras, vaults, and bulletproof doors to keep assets safe, fintech startups do not. This makes it harder because virtual security is pretty much difficult. Any vulnerability or breach in the system can pose great threats to the end-users. And this does not just apply to their money, but also their details.

Solution

You need to invest heavily in security to protect your app from any security breach. You can consider implementing two-factor authentication, data encryption, biometric authentication, and real-time alerts.

#6. Retaining users and making their experience worthwhile.

A standard fintech app should not be too easy or too hard to use. A balance should be kept between security and a great user experience. When it is difficult for users to log into your mobile app, they will become dissatisfied and you wouldn't want that to be the case. However, if you make it too easy to access the app, people will be afraid that their details are not safe.

Solution

Ensure that your user interface design is not only user-friendly but safe as well. You can conduct a competitor analysis to know how the user interface of other fintech startups is.

#7. Marketing and expansion issues

Every company goes into business to make a profit. To do so, you need to find a niche and get customers. For a fintech startup, the competition may not just be with other fintech startups but the entire traditional banking system that many customers patronize.

Solution

Optimize your operations and ensure that the quality of services you are providing will be equaled by no other. Actualizing this may imply investing both human and capital resources.

Final Thoughts

Though the traditional banking system has not been eager to adopt new technologies, I believe that fintech has come to stay. And though it may take a while, its usefulness and convenience will soon wear out all forms of resistance to it.

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