Fintech software facilitates all types of financial products and services, making customers' financial lives easier and more convenient. For fintech companies, the future is indeed rosy. They have managed to disrupt the financial service industry with innovative new business models. These innovations include cryptocurrency, e-wallets, and digital-only banks, among others.
5 Fintech Software Customer Onboarding Challenges
Although fintechs are not the same as traditional banks, many products and services are the same or similar to bank products. They have some risks and issues in common. However, banks are regulated and controlled in a way that fintechs are not. So although the line between fintechs and traditional financial institutions has become increasingly blurred, the challenges vary somewhat, especially when it comes to onboarding new customers.
1. Regulatory Issues
Fintechs have long maintained that they are not financial institutions. True. And as non-banks, they aren’t subject to the same degree of regulatory requirements and oversight. But, as mentioned, the line is blurry, if it exists at all. Further, fintech software is used increasingly by financial institutions, either in collaboration ventures or as a third-party solution.
Meanwhile, governing bodies and regulators are keeping close tabs on fintech companies. This isn’t even a recent development. As early as 2015, the U.S. Treasury Department slapped PayPal, one of the world’s first fintechs, with a fine of $7.7 million for processing questionable payments. And it wouldn’t be the last as penalties have mounted in recent years.
One of the newer areas of concern is cryptocurrency regulations. As certain types of cryptocurrencies become more mainstream, the Federal Reserve chairman, Jerome Powell, is pushing for a regulatory framework. The cost of compliance is high, particularly when it depends on cumbersome manual processes. But the cost of non-compliance is even higher. Undoubtedly, fintechs will need to pay closer attention in the future, implementing the appropriate controls to meet emerging regulatory demand and inspire customer confidence as they onboard.
There’s still strong resistance against these regulatory measures being imposed on the cryptocurrency market. However, the need to address criminal activities involving cryptocurrency trumps the need for customer anonymity. The more cryptocurrency becomes mainstream, the greater the need to ensure the legitimacy of crypto transactions.
2. Cyber Attacks
With a new attack occurring every 39 seconds, fintechs are a popular target. With more people managing their finances through the internet, fintechs must be more vigilant than ever. Malware is one of the biggest problems. Its programs cause harm to devices and users by stealing, corrupting, and manipulating sensitive data. This is how many of the largest data breaches occur. These malware attacks are becoming more sophisticated. No company is immune.
But fintechs that expect to remain viable competitors in the future must protect customer data during onboarding and throughout the relationship. They will do this by using solutions that detect and prevent fraud.
3. Technology Innovation
Creative uses of new technologies have led to whole new categories of products and services that gain the loyalty of digital banking customers. Fintechs will be challenged to leverage the best in technological innovation to enhance the customer experience and ensure that customer data is protected.
One of the best ways to do this is through the use of artificial intelligence technology for security and fraud detection. Artificial intelligence can streamline onboarding, allowing fintechs to retain more customers during the process. Further, AI can analyze data and determine client risk through activities and historical behaviors. AI allows fintechs to increase security and detect fraudulent activity before the damage is done.
4. Rapid Growth
As the market expands and things advance at a rapid pace, consumers are demanding faster and easier access to their financial accounts. They expect a seamless online experience and the ability to access new services with a few clicks on a mobile phone. Meanwhile, fintech becomes increasingly susceptible to data breaches and vulnerabilities. Without the deep transactional history of traditional financial institutions and the governing regulations to guide them, it can be a bit of a Wild West environment.
But with billions of dollars at stake, not to mention the reputational risk, fintechs must keep pace with the explosive growth. To meet the burgeoning demand, the solutions that fintechs provide must be scalable and secure. To do this, the underlying technology must be impeccable, bulletproof, and frequently updated.
5. Money Laundering
The crackdown on money laundering makes it increasingly difficult for criminals to obscure criminal activity. Cryptocurrencies, however, are currently unregulated and untraceable. Of course, criminals know this and may try to use cryptocurrency to launder money. The cryptocurrency market is growing and is estimated to be worth $2.48 trillion in May 2021, up from less than $1 trillion at the start of the year.
Fintech companies don’t follow the strict rules that financial institutions follow in terms of knowing their customers. Yet regulated or not, dubious practices are not without consequences. It will be incumbent upon fintechs to protect themselves from fraud and compliance issues.
Onboarding New Customers Securely
The market for innovative financial services is rapidly expanding. For fintechs that expect to capture their share of the market, outdated onboarding processes don’t help. Customers expect a user experience that is easy, reliable, and safe. It is, after all, their first introduction to your company.
Instnt AcceptTM provides an easy, reliable digital onboarding solution. We use artificial intelligence and patent-pending predictive analytics to detect suspicious behavior, ensuring that only good customers get through. That doesn’t mean you’ll onboard fewer customers, however.
With Instnt, three things will happen immediately. First of all, fewer customers will abandon the process due to frustration. Second, you’ll see an increase of up to 50% more good customers who get approved. And, third, you’re indemnified against fraud losses up to $100M annually. Instnt extends beyond personal data, using our proprietary technologies for more robust verification.
We’ve done the heavy lifting, freeing up your IT resources so that they can get on with other work. Your digital onboarding solution can be up and running in minutes. See how it works for your fintech company.