Fintech-driven banks also use a cryptocurrency that is not formally governed by any set of standards and global regulations. As a result, the frequent use of non-regulated currencies results in illicit money laundering and even terrorist financing.
Fremont, CA: Fintech services have undergone a significant transformation in market size and are projected to hit almost 4.8 trillion by the end of 2020. However, even though many financial institutions have readily embraced fintech services, some hidden obstacles remain in the fintech industry. Financial institutions should also be well informed of the common problems facing the fintech industry.
Here are four challenges in the fintech industry:
Application Security Risk
Many banks use fintech software to access their customers' financial details in real-time. But if a software application does not have maximum security modules and effective codes, it will automatically become vulnerable to cybercrimes. The attackers are exploiting the inadequate protection of the apps to steal customer data. So if anyone is trying to create a fintech software solution, they need to be very confident that the program has all the critical security features included in it.
Digital Identity Risks
With the advent of digital technologies in the banking and finance sectors, mobile applications using one-time passwords and security codes have increased dramatically. These security codes and passwords could easily be obtained due to the weak fintech system offered by some of the fintech service providers. Financial institutions also need to revisit their online security infrastructure to overcome these risk factors before preparing for the introduction of fintech.
Internet hacking and malware attacks have been prominent for some time in the past. Almost all banks use fast programs to exchange sensitive financial information more safely. However, the latest cyber assault on one of the SWIFT infrastructures showed the level of sophistication of hackers. Banks and financial companies have weaknesses in their systems, and hackers are taking advantage of these loopholes to conduct malware attacks.
New Encryption Technology
There is no question that the overall performance of the finance sector has significantly improved with emerging innovations. But these robust innovations have also given rise to many of the significant challenges facing the finance industry. Blockchain, one of the revolutionary innovations, has given rise to several safety issues. Second, blockchain can be hacked very easily by attackers like any other network. Second, blockchain transactions are based on trust between two or more parties. Many people use bitcoin in exchanges and trust that exchange firms will take care of it, but it doesn't happen very often.
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