Software Development Challenges in Fintech: Part One

Fintech is an incredibly complex sector. And with complexity comes challenges.

One of the core challenges is that fintech companies must handle – and integrate – a number of different systems. This makes the development of applications more difficult than in other sectors.

However, the need is still there with new research showing that Fintech continues to grow rapidly, as the worldwide adoption rate is now 64%.

But what are the other challenges in Fintech? And how does the industry solve them? Here are three main challenges:

Open bank

The new Open Banking Regulation is a game changer for fintech companies. It allows third-party providers, such as fintechs, to access bank data. This changes the way people interact with their banks and creates opportunities for innovation in areas such as payments and lending.

And it is now everywhere, every day. You can pay for your products online for example via digital banking technology, or manage all your investments and savings in one app and use accounting software to consolidate all your bank accounts into one system. All this is possible through open banking.

When creating open access to banking and data, security and compliance are areas that naturally place themselves high on the agenda. The protection of sensitive customer data is adapted to strict security measures in open banking. The open banking system is facilitated by the use of application programming interfaces (APIs), which allow the sharing of data and information between the relevant parties.

Leading developers and fintech companies are working to ensure that these APIs are secure and comply with privacy regulations such as the General Data Protection Regulation and the Payment Services Directive 2.

In this system of open exchange, interoperability is everything. Implementing interoperable APIs ensures that third-party providers, from large financial institutions to digital banking apps, can easily access data through the same connection – meaning all consumers can reap the full benefits of the products. If developers produce APIs that can work seamlessly with different systems, including legacy systems, they can ensure compatibility.

Finally, open banking, by its very nature, requires large bundles of data and transactions. So the reason open banking has been able to succeed where it has is through the development of scalable architecture that allows the system to handle any peaks in traffic, adapt to user needs and support future growth.

Digital transformation

Digital transformation is a comprehensive change in the way business is done, with the aim of improving performance and efficiency. It is about adapting to the new digital world, where customers are empowered and have more choices.

Digital transformation is often confused with digitization; however, they are not identical concepts. Digitization refers to the use of technology in an organisation, while digital transformation involves rethinking an entire business model from start-ups to established companies.

When it comes to digital transformation, managers consistently invest in data processing processes. Digital transformation relies on and generates a huge amount of data. Working with experts in data management, security and privacy is essential to scale and keep things moving quickly, accurately and effectively.

The transformation process also relies on leveraging software expertise capable of managing outdated legacy systems that are no longer supported. Using this support is essential to understanding whether the systems will be compatible with new digital technologies and taking the necessary steps to move forward.

Fintech’s acceptance of open source software

Open source software is a way for developers to share their work and collaborate with others on projects. This type of software allows for rapid development, as well as greater security and reliability because there are many eyes looking at the code. The community behind open source projects is also able to keep pace with new technologies, allowing them to scale as needed.

With many chefs in the process, developers must create effective means of coordination: open source software development is often a collaboration involving many developers who may be located in different parts of the world. To deal with factors such as time zones and cultural differences, many companies adopt a mixed strategy that uses onshore, nearshoring and offshoring to suit their needs as and when required. This creates more cost efficiency and effective collaboration.

Building this vibrant and engaged community is critical to the success of your open source projects. Sharing software and engagement with different contributors can drive innovation and progress projects forward. This is epitomized by fintechs such as Stripe, a leading enterprise financial infrastructure platform that provides an industry-leading solution for embedded payments and financial services. Its open source software Stripe React Native SDK is available online and allows users and developers to integrate payment options such as Apple and Google Pay into their React Native app.

You also need to consider quality control. The quality of open source software can vary significantly, and maintaining the quality of the code base can be challenging. Developers must ensure that code is thoroughly reviewed and tested to avoid introducing bugs or vulnerabilities.

The bottom line

Despite the need to embrace fintech, it’s an incredibly intricate and complex sector, so it’s no surprise that this presents a wealth of challenges – but, as evidenced, a wealth of solutions too. Fintech shows no signs of slowing down, and industry leaders and developers are facing these challenges that software development faces in order to successfully progress in the industry. Open banking, digital transformation and open source software have their own difficulties. As long as these issues are recognized and addressed, fintech software development will continue to flourish.