Modern financial technology or FinTech has developed a great deal over the past few years. Advances in FinTech have made it easier for people to manage their accounts, perform trades, manage their portfolios, and explore new areas where they can invest.
Startups and traditional financial firms alike are making huge investments in FinTech. Startups provide the kind of agile growth that sometimes eludes the established banks and financial services firms. Established companies bring large R&D budgets to bear. Both types of developers have important roles to play in FinTech developments for the future.
Vladimirs Remi explores the world of FinTech, explaining how the sector is forging toward domination of the financial industry.
Types of Customers in FinTech
FinTech customers range from the average checking account holder up to multimillion-dollar companies. Advances in mobile technology and cloud computing have made it possible to manage accounts, perform transactions, and keep tabs on financial items from anywhere in the world using only a smartphone.
Large companies also use FinTech products to help to manage their finances. These powerful software products are able to handle many transactions at once, leading to cost savings and increased speed of doing business.
Investment Products
FinTech is especially attractive to companies and individuals who want to invest in stocks and other securities. Using real-time market information, investors can easily place their money in the market and manage their portfolios.
Integration with Blockchain
FinTech and blockchain go hand in hand. Blockchain enables transactions performed from anywhere to be completely secure. Blockchain-based computer systems are becoming a greater part of the infrastructure behind FinTech.
The advantage of blockchain lies in the ability to complete secure peer-to-peer transactions. Blockchain also allows for the creation of an audit trail, relying on a distributed database. Anyone can check the blockchain ledger and see which transactions have been completed and for how much. This transparency allows FinTech companies to do their work with the trust of their consumers intact.
Blockchain also greatly speeds up transactions. A settlement could take two to three days, but blockchain shortens the process to a matter of minutes.
Regulatory Issues
FinTech companies have traditionally said that they are not banks. As they increasingly move into traditional banking functions, they must be careful to follow all of the regulations imposed by federal and state banking statutes, as well as the requirements of the Federal Reserve Bank and the FDIC. Vladimirs Remi warns FinTech companies that consumers need to know that their money is safe in the system, and they need to be able to conduct their important business without worrying that they are breaking any laws.
There is a great deal of risk inherent in FinTech operations. Regulatory, reputational, and operational risks threaten the safety of a bank or financial institution.
Consumers expect their FinTech solutions to be as irreproachable as a bank when it comes to security issues. Some of the most common regulatory issues faced by FinTech companies include securities or trading violations, consumer information, and consent violations, and credit or lending-related violations.
Compliance is an issue that needs a great deal of attention as a result. Taking compliance issues into consideration, there is a wide opportunity for startups that can handle these issues for FinTech companies.
Security Concerns
There are many serious considerations in the use of FinTech. Chief among these is security. Blockchain technology goes a long way toward helping create a secure system, but there are many vulnerable points in the information chain.
The legacy banking systems at the core of the industry are often vulnerable to hackers. These old, siloed systems can be in danger when they are joined to insecure cloud-based programs. For example, banks that contract with new mobile app providers need to be sure that the interface between their database and the app is sturdy and cannot be exploited to gain unauthorized access.
Cloud-based solutions are inherently vulnerable when adequate security precautions are not taken. Companies that partner with inefficient cloud-based solutions may be vulnerable to breaches. Security breaches will lead to a loss of trust between the consumer and the financial institution, so the progress of FinTech programs will be halted. In the best interests of FinTech, every company must be certain that they are operating securely.
FinTech companies and financial services providers alike need to be aware of the issues surrounding security and to be able to meet challenges in a robust fashion.
Operational Challenges
Disruptive sectors like FinTech create a great deal of excitement, but along with the disruption, problems can arise. These problems relate to conflicts with the existing architecture and the creation of new implementation challenges.
It is well-understood that these technologies solve some problems, but since financial systems are so complex, it is likely that they will create others. Companies need to prioritize which issues to fix first and how to solve the problems without impacting other areas of business. Executives need to be able to apply new technologies and determine the impact of these new procedures on existing data.
Risks and Rewards
FinTech is an exciting sector, and the risks that come along with innovation are becoming increasingly accepted. For the average consumer, the convenience of online banking and investment software is key, but security is paramount. FinTech firms need to learn to balance innovation with reliability.
Vladimirs Remi understands that FinTech has immense potential for growth around the world. Spreading the power and convenience of FinTech products requires a great deal of innovation as well as the care taken to be sure that these products work.
Founder Dinis Guarda
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