Biggest FinTech Development Challenges & Solutions

The FinTech industry is changing at a rapid pace, and it’s incredibly important for you to stay on top of these changes. With fintech being so competitive, you need to be able to take all the necessary steps towards building something successful with your team members before they’re even hired.

There are several challenges that come with developing software for the fintech industry. From regulatory compliance to security, these hurdles can make or break your product and lead you to success (or failure). Let’s discuss these issues in detail so that you can identify the most pressing FinTech development challenges and better understand how they can be solved. 

What are the biggest challenges of FinTech development?

FinTech software regulatory compliance

Compliance with regulations is a major challenge for the FinTech industry. There are many different regulatory bodies, depending on the geographical location of the business, that need to be considered when developing and deploying a financial software system.
The technology used the business strategy, the software, and a lot more things should comply with the government policies to avoid serious consequences.

The difficulty also lies in the fact that regulations are subject to change, so it can be difficult for companies to keep up. On the other hand, regtech solutions can help banks to monitor transactions and detect fraudulent activity. Regtech will always be relevant for the fintech industry as fraudsters are constantly finding new ways of bypassing the law.

How to handle it?

It might be a good idea to hire a legal expert to guide you through the regulatory requirements and nuances. They should closely monitor and stay up to date with the latest regulatory policies to enable you to implement any required changes as soon as possible.

You can also conduct regular compliance audits to assess your software’s compliance with applicable regulations. Identify any gaps or areas for improvement and take prompt action to address them.

Ensuring top-notch data security

The biggest problem for fintech development is creating products that are both user-friendly and secure. While brick’n’mortar banks protect valuable assets behind bulletproof doors, digital financial products security is getting much more challenging.

Financial data is highly sensitive, so a small code vulnerability can lead to heavy consequences since financial institutions often hold large amounts of customer data.

In addition, users expect financial products to be easy to use, so developers must strike a balance between functionality and simplicity.
If a fintech company does not have adequate data security measures in place, it could be at risk of losing customer data to hackers. This could damage the company’s reputation and lead to huge financial losses.

How to handle it?

The technologies that might be helpful to secure your fintech development are as follows:

• Two-factor authentication
• Biometric authentication
• Data encryption
• Real-time notifications

In addition, the practices assisting to protect sensitive information are listed below.

Frequent updates

Regular updates for the software and third-party libraries, and making sure its users have the latest versions. Develop a comprehensive cybersecurity strategy that encompasses data protection, network security, access controls, and incident response plans. Regularly update and refine this strategy as new threats emerge.

Thorough testing

Frequent security testing is the way to find the most vulnerable parts. Perform regular penetration testing, vulnerability assessments, and code reviews to identify and mitigate security vulnerabilities. Engage the services of specialized security firms if needed.

Train employees on security best practices

Educate your development team and employees on cybersecurity best practices, such as safe coding techniques, data handling procedures, and recognizing social engineering attacks. Regularly reinforce security awareness through training sessions and internal communications.

Detailed documentation

Well-documented software modifications are essential for being able to quickly detect a breach in case it occurs.

High cost

The high cost of fintech software development can be a challenge for companies looking to enter the market. Many factors contribute to this cost, including the need for specialized skills and experience, the need for expensive hardware and software, and the need for a high level of security.

How to deal with the high cost of fintech development?

There are several ways to overcome the high cost of fintech development:

• partner with an experienced and reputable firm that can provide the necessary expertise and resources.
• use open source solutions where possible, which can help reduce costs.
• use a SaaS fintech platform to build on top, available for an affordable monthly fee, meaning no infrastructure maintenance headaches.
• prioritize features based on value and determine the core features and functionalities that provide the most value to your target users.
• leverage cloud services, utilize cloud infrastructure and services to reduce upfront hardware and maintenance costs.

Lengthy development period

Financial software development can be a lengthy process, often taking months or even years to complete. This can be a challenge for fintech companies who need to quickly adapt to changing market conditions or who are under pressure to release new products and features promptly.

The length of time it takes to develop fintech software can have several consequences, including increased costs, delays in releasing new products and features, and frustration among customers who are waiting for updates. Moreover, it provides competitors with an opportunity to outpace and win the target audience.

How to deal lengthy software development period in fintech?

There are a few ways to overcome the problems posed by long fintech development terms:

• using agile methodology
• outsourcing fintech software development work
• investing in pre-built solutions
• divide complex fintech development projects into smaller, more manageable phases or sprints.

Unnecessary modesty aside, we at SDK.finance happen to offer a software platform for building financial products on top (remittance apps, payment processors solution, neobanks, digital wallets, etc.) that can accelerate the time-to-market and save at least 1 year of active development.

Lack of technical expertise

The fintech industry is growing rapidly, but there is a lack of technical expertise among software developers. This can be a major challenge for companies who are trying to keep up with the latest trends and technologies.

This lack of technical expertise can lead to missed opportunities, delays in development, and increased costs. It can also make it difficult for companies to attract and retain top talent.

How to handle it?

Encourage continuous learning

Create a culture of continuous learning and professional development within your development team. Encourage them to explore new technologies, attend conferences or webinars, and participate in industry forums. They also need to offer competitive salaries and benefits packages to attract and retain top talent.

Provide mentorship opportunities

Pair junior developers with experienced mentors who can guide and support their growth. This mentorship fosters knowledge transfer, skill development, and overall team expertise enhancement.

To get info about choosing fintech software developers check this article. 

Compiling the right fintech stack

With the technology advancing in giant leaps, selecting the right fintech stack, i.e., servers, tools, programming languages, technologies, frameworks, databases, etc, is critical to ensure the product built won’t get outdated before its release and will remain relevant for a long time and able to pursue its goals.

How to handle?

Singling out a particular language won’t be helpful in this post, as its choice lies primarily on the developers who consider the business goals and analyze the company size and maturity before picking the fintech stack for the project.

Whether it’s Ruby, Java, Python or C++ that are chosen as the programming language, it will depend heavily on the business requirements in the first place, also taking into account the customers’ operating systems, backends, type of applications required, etc.

Designing integration-ready applications

Free-flow communication and streamlined integrations make up a crucial aspect of a future-ready fintech product. They open the way to continuous innovation and simplify updates.
API-first or API-driven development offers exactly this – the opportunity to enable easy interaction between internal systems and applications and facilitate integration with external third-party service providers.

How to deal with it?

API-driven development requires specific API-first software architecture – first designing the APIs, then building the rest of an application around them.

So, for companies that are considering the start of the development of a new product, employing an API-first approach will help handle this challenge.

Alternatively, using a pre-developed API-driven fintech software platform like SDK.finance to build a payment or banking product on top offers a set of open APIs that are ready to use for integration with the necessary services and providers to ensure flawless operation of the app. 

Designing cloud architecture

FinTech software solutions backed by the cloud architecture are critical to building next-gen financial services products. Multi-platform support is key for the fintech apps to get rid of the infrastructure complexities. Cloud-ready fintech products allow benefiting from the SaaS-based models and leveraging public or private cloud platforms to reduce infrastructure costs and eliminate maintenance headaches for banking software development.
In addition, cloud-ready financial software development services are scalable and agile, ensuring that financial companies are capable of innovating at scale and staying ahead of the competition.

On the other hand, location-wise, cloud-based fintech solutions may violate the data management regulatory requirements (some countries prohibit storing sensitive data on cloud servers outside their territory), which limits fintech companies in their infrastructure choices.

How to solve?

Employing hybrid cloud solutions instead of cloud ones resolves the regulatory compliance issue in most cases.

According to this model, the system connects private and public cloud components plus on-premises computing. This approach helps reduce infrastructure costs by relying on a third-party provider for IT resources, like apps or storage, and using a private cloud for sensitive data storage or critical applications. This approach empowers startups and SMBs to break the high infrastructure costs barrier and enter the market on a smaller budget by delegating the

SDK.finance uses the hybrid cloud approach to provide its subscription-based software customers with the opportunity to use its subscription-based fintech platform for their financial service products without huge upfront investments and benefit from the cost-efficient hybrid-cloud delivery model for their growing businesses.

Namely, the backend API-driven app is available through the AWS marketplace, while customers’ main databases are hosted and maintained by their in-house teams. 

How to improve FinTech development efficiency?

There are a few actionable tips that can help make the FinTech development process more efficient. Let us list them below.

1. Define the scope of the project and create a roadmap.
2. Assemble a team of experts who are familiar with the latest technologies and trends.
3. Develop a prototype or MVP (minimum viable product) to validate the concept with potential users.
4. Create a detailed FinTech development plan and timeline based on the feedback received from users.
5. Build the software using the latest technologies and tools available.
6. Test the software thoroughly before releasing it to production.
7. Deploy the software on a secure and scalable platform such as AWS (Amazon Web Services).
8. Monitor user feedback constantly and make changes/updates accordingly.

FinTech apps are a hot trend right now, but making one is no easy task. Knowing the biggest FinTech development challenges you might face when developing a fintech app will enable you to avoid them or handle them successfully.