Jodie James, Freelancer

Innovations in the financial technology (fintech) industry are changing how individuals, businesses, and banks handle, move, and use money. These innovations and solutions have changed how we engage with money. Even with how successful players in this industry have been in recent years, they still must face and overcome some challenges. Here are some of those challenges.

Data Security

Data security is a serious concern for anyone who works with data that is transmitted through any sort of network. Physical security has been solved for a long time now, and we expect banks to use guards, cameras, and other security options to keep themselves secure.

Things are very different once you enter the virtual world. Vulnerabilities exist and even when they are not obvious, they can cause a lot of damage if they are discovered by a malicious actor.

Businesses in the fintech industry must implement security measures to keep data safe. That can be done by using two-factor authentication, obfuscation and encryption, biometric authentication, real-time monitoring, and behavioral analysis.

Compliance With Government Regulations

The fintech industry deals with a lot of data, and some of this data includes personal information that should not be shared and must be handled with the utmost care. Because of this, there are a lot of government regulations around not only how they handle, process, and store data, but also on how they use this data.

Before creating any application, players in the industry should ensure it complies with set regulations. Businesses can also hire a legal consultant to ensure this.

One of the most important regulations they must keep up with is the detection and prevention of fraudulent activity. They must ensure they are following the rules and regulations set forth by NACHA, which is responsible for the ACH network.

Following NACHA account validation rules requires that businesses and others in the fintech industry know what they are and how they impact payments. There are players in the fintech industry who have complied with the latest NACHA account validation rules, with Yodlee being a great example. Yodlee provides account verification services that help ensure faster and smoother customer onboarding while also ensuring the highest levels of security. They develop products and solutions for different industries and sectors including banking, business, and personal financial wellness.

Big Data and Artificial Intelligence

Data and AI are essential in the fintech industry. Banks and other institutions rely on data to know who their customers are, make lending decisions, and assess risk. Artificial intelligence helps make things a lot easier.

Even with how useful they are, big data and AI can cause a significant challenge. They need people with the right expertise and constant maintenance.

Additionally, those with existing systems and apps can find it challenging or even impossible to integrate AI into their existing systems and might have to start from scratch.

Its growth in the past few years might mislead you into thinking that players in the fintech industry do not face significant challenges. They do, and they have to know what these challenges are if they are to overcome them.