Profits, Perils and Limitless Potential

Opinions expressed by Businessman taxpayers own.

global () has skyrocketed in recent years, in part attributable to Covid-19, which served as a compelling motivator toward contactless and digital payments. Innovations like digitized and mobile wallets are now used everywhere. The total scope of the global Fintech market in 2020 was valued at $7.3 trillion (according to Research and Markets) and is projected to grow at a CAGR of 26.87% in the post-COVID-19 period.

As the moves from ‘responding’ to ‘recovering’, new opportunities are emerging for fintech companies. The increased receptivity to technology-based solutions positions the industry well for growth and expansion, but there are key issues to consider before launching or investing in a fintech company. Among them, what does it take to succeed in this increasingly saturated (but still nascent) market, what are the risks, and what does the future of fintech look like?

Already infiltrating front, middle and back office operations within the financial industry, AI applications are at the heart of many businesses. In fact, banks that adopt an AI-first mindset not only increase their chances of staying relevant, but are also more likely to increase revenue (through personalization of the customer experience and lower costs due to automation and reducing error rates). In fact, global banks are estimated to have the potential to generate up to $1 trillion in additional value annually through AI technologies, according to McKinsey and company.

Related: The rapid growth of Fintech: a revolution in the payment industry

Why user experience is key

If staying ahead of the technology curve is paramount for a company in the fintech industry, so is keeping the user experience (UX) simple. Making platforms and applications as easy to use as possible is essential for companies in this sector. If users constantly have to deal with quirks, bugs, and errors, there is little to no chance of them sticking around.

So leveraging technology to create a thoughtful and effective product is critical to customer retention, but so is retaining a human element. Excessive automation inhibits building a personal connection with a customer and thus prevents the formation of a trusting relationship. An app can be well thought out, but still sterile. Creating a warm human experience is vital.

To the extent that the UX must be clear, it must also be the mission of the project. According to Matt Cohen, CEO of GRAND, “Just about anyone can describe the best apps in less than 10 seconds.” Removing the frills and instead offering a simple and functional product can help build trust with the customer, which is essential when disclosing personal and financial information. Similarly, being able to respond to changes in consumer sentiment or market regulations will help a business emerge victorious. Showing willingness to adapt to changes in this somewhat volatile industry is crucial.

Related: 7 Things to Consider Before Launching a Fintech Startup

find a niche

Every month, dozens of startups enter the fintech market, with Statistical reports that its global amount increased by 72% between 2018 and 2020. Not to mention, global banking The giants are constantly upping their tech game, to the point where 96% of shoppers around the world have a fintech app on their phone. So getting your foot in the door can be quite a challenge. You’re not going anywhere if you haven’t found your niche, never mind having to comply with regulatory requirements, which can be onerous.

Role of cryptocurrencies

Digital currencies are taking up a growing part of the fintech industry. At the end of 2021, the top 100 companies in that sector had a combined valuation of $1.82 trillion. And what was the valuation of the top 100 cryptocurrencies? Around $2.44 trillion dollars. This disruptive crypto model shakes traditional financial systems: it not only reduces high fees and the risk of fraud, but also offers a more transparent and efficient payment method. Indeed, the acceptance of in a business model expands its reach in international markets. It presents a unique form of fintech, with the ability to reshape every vertical of the financial sector, from loans and payments to commerce and investments.

Related: 5 things to know before investing in cryptocurrencies

The risks

There are core technologies that improve financial systems and transactions, including AI, big data, security, the Internet of Things, the cloud, and . Blockchain systems are a durable, secure and reliable means of storing data and are an increasingly implemented technology in financial transactions. Partner networks like Ethereum allow for true decentralization and support for smart contracts. In fact, according to Deloitte Global Blockchain Survey 2020, More than 36% of companies are willing to invest $5 million or more in this new technology, perhaps due to the superior level of data quality it provides.

As much as this decentralized system offers attractive features, it also comes with some risks. Privacy concerns are somewhat pervasive among partner companies. Revealing confidential information weakens your competitive position and therefore threatens performance. Equally worrying is that private account passwords are impossible to recover, so if users lose them, they will lose access to their funds. Additionally, with the lack of regulation in certain blockchain technologies, there is an increased risk of initial coin offering (ICO) scams, particularly with regards to cryptocurrencies. As such, if you are considering implementing blockchain technologies in your business or investing in one that already uses blockchain, it is crucial that you keep these concerns in mind.

Related: What is on the horizon for payments and fintech in 2022?

The fintech sector is a fertile ground for innovation and change, constantly reshaping the sphere of business. It is truly the future of global finance, not least because it incorporates the crypto phenomenon. While we can’t predict the exact future of this growing industry, one thing seems certain: companies with a niche agenda and an adaptable, tech-focused mindset have a better chance of getting financed and succeeding.