The FinTech segment has been on an upswing given the increasing interest of investors and VCs in the industry. From simple mobile payment applications to complex blockchain projects that encrypt transactions, FinTech today encompasses a gamut.
Various business areas have been transformed by the digital revolution, and financial technologies have played a significant role in the process. FinTech app development is now more popular among insurance companies, banks, and trading platforms to facilitate smoother communication with users. In the upcoming years, FinTech is expected to grow at an average rate of 12%, reaching 188 billion euros in revenue by 2024.
Chief Technology Officers (CTOs) until recently, were focused on building new systems and scaling existing ones quickly. But today, the CTO – Chief Technology Officer and technical leader face newer challenges including recruitment, compliance with regulations, venture capital funding, and cybersecurity.
What are the Challenges FinTech Chief Technology Officers (CTO) encounter on a regular basis?
Innovation & Competition
Immense scrutiny and competition have led to exorbitant demands and an incessant need for growth and innovation. These come from favourable facets such as financial inclusion, high internet usage, large consumer base, pandemic-induced factors and so on. Given the fierce competition, FinTech companies are striving hard to have a competitive edge.
Chief Technology Officers and other tech leaders have to take necessary steps to include innovative upgrades in the existing business model. While many are innovating and venturing into new projects, innovation requires extensive R&D and involves high costs.
Adhering to varied regulatory compliances has been a challenge for the FinTech industry. As a result of the 2008 financial crisis, earnings and credit losses are subject to an enormous increase in regulatory fees. Now, if an app is being developed, it has to be compliant with all the necessary government approvals. This could vary as per the region. The final product could end up experiencing resource pressure and may have a difficult time correlating data from different sources.
Data Security & Localization
With an exponential increase in digital transactions, data security is inevitably a concern. Experts have voiced that the FinTech segment is the most prone to cybercrime.
Digital payments are expected to reach $236.1 billion by 2028, growing at a CAGR of 19.4% from 2021. As systems evolve, more complexities and issues will spurt. Failure to maintain data security will result in grave repercussions. FinTech companies will need a more robust, transparent, and reliable infrastructure for storing user data. With consumers getting involved in understanding the data security of their transactions, companies will have to take privacy policies seriously.
The future by default is more consumer-focused than it has been in the past. Data infrastructure will be closely monitored by CTOs in the coming years. And the latest cybersecurity innovations will be embraced to improve data privacy and transparency in every aspect.
Adoption & Use of New Technologies
Although the FinTech sector has grown leaps and bounds, the adoption of new technologies and continuous tech upgrades is essential. Chief Technology Officers should include these technologies for the companies to stay updated in the market. Popular technologies like machine learning, artificial intelligence, blockchain integration and big data can help companies stay ahead of the curve and create new business opportunities.
Hiring & Retaining Quality Talent
The chief technology officers of FinTech companies forecast a challenging recruiting and retention landscape in 2022, particularly with the growing number of remote and fully distributed teams. Despite remote work expanding access to a global workforce, there is intense competition for talent. Especially for smaller companies competing with industry giants that offer better remuneration, flexibility, and opportunities.
There is a common concern here that smaller businesses are more likely to fail in retaining such talent without high pay. Similarly, startups on a limited budget are unable to afford high finances to hire and retain quality engineers and leaders. Many FinTech companies are relying on third-party consultants to source and recruit the right tech talent for the companies.
Going Public & Public Relations
FinTech companies are highly tech-savvy which means that the level of human interaction is the least. Hence, any technical glitch gets amplified manifold. FinTech companies in general face challenges in avoiding PR disasters caused by their tech. Here, FinTech Chief Technology Officers have to absolutely double-check their algorithms for human prejudice. It’s a unique pressure, and dealing with it requires a special kind of sensitivity. The FinTech industry becomes a cognitive dissonance for the Chief Technology Officers.
FinTech businesses usually witness high scalability, which implies that the Chief Technology Officer has to be on the top of his/her game and work around new challenges and opportunities. As important decision makers, tech leaders strategically devise plans to take the company to new heights such as going public. An IPO is a long and arduous process, where a Chief Technology Officer has to evaluate and anticipate the possibilities and take the necessary steps in supporting the leadership and the team while going public. One part of their role at this point may have to be public facing with a meticulous approach.
Irrespective of the challenges, the FinTech sector has seen numerous technological additions and upgrades to better serve the end consumers. As with any industry in its development stage, financial organizations may experience several challenges when crafting their offerings.
Every CTO can look up and learn about the opportunities and challenges of a FinTech Chief Technology Leader. Devising strategic or operational frameworks, today FinTech CTOs enjoy a competitive landscape rife with potential from advanced tech adoption.