Overcoming the Top 5 Challenges of Fintech-as-a-Service Platforms

Fintech-as-a-service platforms have made waves and disrupted the finance industry, but they come with a set of challenges. This article talks about overcoming the top five challenges posed by FaaS platforms.

Even though technology has marked its presence in most business sectors, it is still embodied with its own set of challenges. For example, fintech-as-a-service (FaaS) is an innovation that has broadened the range of investment and banking possibilities, thereby making them simpler and more flexible. Multiple integrations of various technologies have resulted in fintech programs addressing the most complex needs of players in the financial market. 

FaaS applications are readily available in the market for financial companies in the form of software development kits (SDKs), which are designed to be easily integrated with existing processes and systems of companies. However, these SDKs need to be upgraded according to changes in regulations laid down by banking/financial authorities on a regular basis. Besides this, there are other challenges that companies encounter while using FaaS platforms. Let’s look at ways to overcome the top five challenges of FaaS platforms.

How to Overcome the Challenges of FaaS Platforms?

1. Credibility issues

Getting a product or service into the market may be easy, but gaining customer trust and loyalty takes a lot of hard work. This is even more relevant in the case of the finance industry, especially FaaS platforms. With money involved, it has been seen that most people lack trust and are skeptical while switching to something new such as fintech, to make their financial operations simpler. As in the case of most new product launches, gaining customer confidence takes time and substantial effort.

Solution: Educating customers about fintech is the only way to gain their confidence. Instead of aiming to sell your product, increasing awareness regarding the benefits of FaaS platforms will go a long way in gaining a larger consumer base. Create compelling educational content through case studies, customer testimonials, and whitepapers, along with the use of infographics to showcase how your platform is beneficial. It would also be a good idea to take problems as examples and compare how FaaS would solve them instead of traditional financial solutions.

Know More: Fintech Regulations to Expect in 2021

2. Data privacy and security issues

In today’s world, data privacy has become the talking point across industry verticals. Traditional banking services are more physical in nature. They are deemed as highly secure by the general public as they rely on vaults, security cameras, guards, and much more to keep customer assets safe. But when we shift to the virtual world, things are not so straightforward. Mobile services, online banking, payment applications, and fintech are perceived as more vulnerable from both a financial and personal information point of view. This can restrict the high potential of applications that FaaS platforms offer.

Solution: In the same way that banks and financial institutions portray how secure they are, you will need to make your FaaS platform highly secure and increase awareness about the same. Some ways of doing this are making sure the platform: 

• • Incorporates detailed documentation
  • Has biometric and multiple-factor authentication
  • Works on encrypted data technology
  • Provides real-time alerts, is constantly updated
  • Has been extensively tested to be secure against hacking

Showcasing all these features will put to rest the doubts that customers have regarding data privacy and security issues.

Know More: 5 Fintech Marketing Strategies to Adopt in 2021

3. Compliance with various regulations

The financial industry is one of the most regulated businesses in the world. Compliance with all laid down governmental regulations is a must. Also, finance-related regulations keep changing often, and the FaaS platform needs to be flexible and upgraded to comply with existing and changing norms. Traditional banking systems are already in place and easily meet regulatory compliance. The same isn’t as easy for fintech. The problem becomes more prominent when you expand your business and venture into international markets, and then, different regional regulations come into play.

Solution: Check the software and its processes with all related legal compliance. It would be wise to hire a legal consultant or even a team for this purpose. You would need to keep abreast of the current and latest governmental regulations and frequently incorporate changes as and when required. Working hand-in-hand with regulators would also help in overcoming regulatory issues. In short, it is mandatory that the FaaS platform is compliant with ever-changing regulations not only in one country but across regions.

Know More: Valentines Day 2021: Inside Fintech and Banking’s Budding Love Story

4. Market reach and user retention issues

Market reach can be difficult considering the thousands of fintech startups that are operating across the world. According to the Statista Research Department’s March 2021 report, as of February 2021, there were 10,605 fintech startups in the Americas, 9,311 in EMEA, and 6,129 in the Asia Pacific region. Getting a FaaS platform or product to stand out amongst this vast competition will not be easy. 

Solution: First and foremost, determine the target audience. Unlike traditional banking services, innovations such as fintech would mostly be preferred by the millennial population, who are much more tech-savvy. Concentrating on their specific needs and catering to them is highly advised. Through your website, increase awareness about your product and services. Also, while doing this, make sure your app is secure but at the same time user-friendly as well. The platform should strike a good balance between high security and seamless user experience. For example, most users would not mind a two-factor authentication process but would dislike being asked to login with a username and password every single time.

Know More: The Rise of Digitalization in Fintech

5. Big data, artificial intelligence, and blockchain integration

Compared to other industry verticals, traditional banking has been slow in getting on board the AI, big data, and blockchain trend. It can be said that traditional financial institutions are wary of new, evolving technologies. Besides, blockchain finance technology is relatively new, and there aren’t too many experts out there in the market. Also, governments around the world are still not very open to the idea of mass blockchain adoption.

Solution: AI and blockchain integration need highly specific expertise. It needs professional experts who know how to integrate them securely into the FaaS system. At the same time, compliance with various government regulations will need to be taken care of. To maintain a blockchain-based platform, hiring your own blockchain development team would be a good idea.

Know More: Fintech 2020: The Year in Review

In conclusion

With each passing day, the popularity of mobile banking is only getting bigger. Technologies such as FaaS will make it convenient for people to carry out transactions as well as aid financial institutions in working more efficiently. FaaS platforms need to incorporate the latest technologies, along with traditional banking experience and regulatory compliance. FaaS is an industry that is still in its early stages, and increasing awareness and educating consumers will go a long way in progressing this disruptive technology.

Did you enjoy reading this article? Comment below or let us know on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to hear from you!