The revolution of financial technologies—or fintech—is changing the financial industry as we know it. Today, 2 billion people worldwide are unbanked, offering fintech innovators an endless market for creative solutions to financial needs.
From crowdfunding to money transfers, banking and investment management, fintech startups face a market with nothing but potential. With just a few best practices, you can make a stronger impact and have a better chance at success with your software project.
Successful financial software depends on inclusion. For decades, financial institutions set tough requirements for obtaining and building credit, accessing loans, and managing stocks. Now, as more consumers move to digital-only purchasing, financial technologies like online banking and PayPal have upended old notions of who has access to the finance industry.
This move toward increased digital finance management may be exciting, but developers should consider a few factors as they enter the world of fintech.
How Fintech Is Used
Financial software has become an important part of our lives. A third of consumers use at least two or more fintech services according to EY’s 2017 Fintech Adoption Index.
Broadly speaking, fintech means any technology that streamlines the delivery of financial services to customers. User experience is its bread and butter, as convenience is a huge selling point for switching to fintech.
As more people integrate fintech into their lives, new software is developed to broaden the scope and efficacy of these technologies.
It’s exciting to think that as fintech expands, we could see the day when virtually all financial decisions are made on an app.
As the fintech industry expands and evolves, compliance standards and regulations change. Regulatory compliance is important in any kind of software development, but especially for financial technologies.
Regulations, while sometimes irksome, are meant to provide peace of mind and security as consumers use financial technology.
The last thing any app developer wants is to jeopardize their users’ data by unknowingly facilitating fraud and scams. The threat of a data breach puts funds and investments at risk, requiring top-notch security standards.
However, fintech regulations can vary from state to state and currently exist in a piecemeal fashion. Innovative fintech developers have to research and be aware of regulations as they develop and change to ensure their technology is compliant.
Fintech Best Practices
Do you want to develop financial technology that’s a smashing success? Here are some basic best practices to get you started.
Establish Strong AML Policy
Banks have always used anti-money laundering (AML) practices in order to meet regulatory compliance and avoid trouble. With the potential for anonymity and fraud within financial software, fintech must comply strictly to AML standards or face steep fines.
Stay Updated on Digital-Only Banking
The banking landscape continues to transform as more financial institutions and fintech entities make the shift to digital-only. While The Office of the Comptroller of the Currency (OCC) considers how to regulate this changing industry, online-only fintech developers should do their due diligence and create policies for security and consumer interaction.
Consider Your Consumers
Consumers are the center of financial technology, and the Consumer Financial Protect Bureau (CFPB) is serious about ensuring fintech creates a fair environment for consumers. One CFPB standard fintech companies need to remember is to offer customers a chance to improve their credit score and be considered for loans at reduced rates. The CFPB has a free, up-to-date resource to check their regulations.
Know Your Customer (KYC) Compliance
Dodd-Frank reforms, Fair and Accurate Credit Transactions Act (FACTA), and the Customer Due Diligence Final Rule all apply here. KYC means identifying and verifying the person running the account on your fintech platform. As with AML, KYC regulations are meant to cut out fraud, and fintech companies must be diligent in reporting any suspicious activity.
Just as fintech companies want to stay abreast of developing trends and market changes, they also want to keep an ongoing relationship with regulators to gain support in complying to industry standards. Research and understanding of changing regulations will be crucial for keeping fintech creators in the game.
The Future of Fintech
Financial software isn’t just a luxury addition to normal banking. In many ways, it is banking. As fintech evolves, keep an eye on these trends within financial technology development.
More and more people are buying cryptocurrency like Bitcoin, Dogecoin, and Omni, as digital dollar literacy expands. The more consumers get comfy with financial technology, the more they try their hand at buying and managing cryptocurrency. This only serves to increase the market for user-friendly fintech that capitalizes on this rising trend.
The lending industry has long been inaccessible to the unbanked and those without lines of credit. Digital banks take the steps out of securing a loan while peer-to-peer lending platforms offer alternatives that remove banks from the process altogether. From small loans to venture capital, the market is ripe for creative lending technologies that prioritize accessibility, convenience, and customer service.
Much of our lives has moved online—especially since 2020—and contactless banking is no exception. Brick and mortar are fading as many move to mostly or fully digital banking. In the U.S., more than 14.1 million people consider a digital bank their primary bank—and that number only continues to increase.
Apps like Robinhood and Invstr have opened the stock trading business to the general public, paving the way for newer, innovative investment management software. While stock market apps boom, developers should consider integrating financial education and stock literacy into their apps to better empower their users to invest smartly.
Technologies which simplify the insurance-buying process join in disrupting the often predatory insurance practices that leave consumers overcharged and underinsured. Insurance technology, or insurtech, streamlines this process and lets consumers customize their insurance plans, trim unnecessary policies, and find savings.
When collectives come together to fund projects or causes, crowdfunding technologies make the impossible possible. Platforms like Kickstarter and GoFundMe are long-running examples of successful crowdfunding technologies, and these methods can even serve as an effective way to fund a fintech idea.
Getting Started on Your Project
Development in the world of fintech is anybody’s game right now. It seems like just about any idea is viable, so if you have dreams about how to make a positive impact, now is the time to invest time and money in a great new product.bu
Whether you choose to hire a software development studio or a team of freelancers, the best thing you can do for yourself is to flesh out your idea and ensure its scope is clear. The more wrinkles you iron out, the less your software will cost to produce.
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