Trends and challenges of the innovations in financial technology

SUBMITTED BY: GAURAV GHUGE

UID No. UGB22-15

B.B.A LL. B (Hons.)

SEMESTER -III
ACADEMIC SESSION: 2023-24

SUBMITTED TO: DR. PURNIMA SING

(ASSISTANT PROFESSOR OF MANAGEMENT)

MAHARASHTRA NATIONAL LAW UNIVERSITY, NAGPUR

Table of Contents
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 Sr.No. Particulars Page No.

1 Introduction 03-04

2 Research Methodology And 05

Objective

3 Literature Review 06

4 Analysis 07-12

5 Conclusion 13

6 Bibliography 13

Introduction

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Fintech is a relatively young financial sector that uses technology to enhance business
operations. Furthermore, fintech is defined as “any innovative ideas that improve financial
service processes by proposing technology solutions according to different business
situations” by Leong and Sung (2018). Following the 2008 global financial crisis,
developments in e-finance and mobile technologies for financial institutions arose, spurring
fintech innovation. Integration in social media, artificial intelligence, large analytics data,
social networking services, Internet technology, and e-finance innovation were the defining
characteristics of this development. This puts pressure on a lot of established financial
organizations, including banks, to evolve their business models in a more useful way.
Furthermore, startups saw this as a chance to get into the financial services sector.
This study is concerned with two categories of start-ups: financial technology (fintech) and e-
commerce. Information technology, policy, regulation, and economic sharing are the driving
forces behind fintech, one of the most significant breakthroughs in the financial services
sector. The fintech business strategy is centered on lending and payment services, just as
banks' business models. It also covers virtual currencies, crowdfunding, security (such as
cyber security), and personal financial advisory services.
Zavolokina et al. investigated the perception of fintech. The use of information technology in
the domains of finance, financial innovation, and digital innovation, as well as start-ups (the
financial services sector outside of banks), is referred to as fintech. The insurance services,
crowdfunding, payment, lending, wealth management, and capital markets are the six fintech
business models. It is obvious that firms face more hurdles the more advanced financial
technology services get. Online lending services have generated debate in the community
around information asymmetry, loan defaults, and moral hazard. The topic of Bitcoin money
laundering has also received a lot of attention. It is crucial that regulators develop how the
regulations should handle this innovation because of this. In order to provide safe and
suitable financial services, regulators employ risk management and consumer protection
principles while also promoting innovation in the financial industry.1.
The advent of checks as a form of payment marked the beginning of technical
innovation in the financial industry (1945). The first credit card was created by the Bank of
America in 1958, and in 1967 ATMs began to assist with financial transactions. A debit card
was then introduced as a transaction tool. Internet banking was introduced in the 1990s with

1
Suryono, R. R., Budi, I., & Purwandari, B. (2020, December 21). Challenges and Trends of Financial Technology
(Fintech): A Systematic Literature Review. Information; Multidisciplinary Digital Publishing Institute.
https://doi.org/10.3390/info11120590 ( last visited on October 25, 2023)

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the help of technological advancements on the Internet. Fintech innovations such as
crowdsourcing and mobile payments were first launched in the 2000s. This demonstrates how
quickly the fintech sector is expanding and the need to examine earlier studies in order to
understand how financial services have changed over time.
A literature study is needed to improve the knowledge of regulators, industry
participants, and academics on the pace of development within the fintech sector. The
objectives of this study are to: (1) ascertain the current status of financial technology; (2)
pinpoint knowledge gaps in the field; and (3) recognize obstacles and patterns for prospective
future research in financial technology. A methodical evaluation of the literature is employed
to achieve these goals.
It is still necessary to talk about the early issues brought up by the growth of fintech,
such information asymmetry, loan defaults, and moral hazard. For the metadata process,
Kitchenham's systematic literature review (SLR) approach is necessary. Analysis and
grouping may be done from the library extraction process and journal work process. Suyono
et al. carried out research on the SLR approach in an effort to determine the state of the art in
peer-to-peer (P2P) lending. Specialists verified the analysis's findings. Lastly, this study
offers a summary of the issues, concerns, and developments in the fintech industries.2

Research Objective

 To identify the top three emerging trends in FinTech and their potential impact on the
financial industry.
2
E. (2023, September 20). The Rise of Finnovation: Explore the Top 10 Trends in Financial Technology. Emeritus
Online Courses. https://emeritus.org/blog/rise-of-finnovation/ (2023) ( last visited on October 25, 2023)

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  To understand the challenges faced by traditional financial institutions in adopting and
integrating FinTech solutions.
 To study the challenges and solutions related to data privacy and cybersecurity in the
FinTech ecosystem.

Research Objective

 What are the top three emerging trends in FinTech, and how might they potentially
impact the financial industry?
 What are the challenges that traditional financial institutions encounter when
attempting to adopt and integrate FinTech solutions?
 What are the prevailing challenges associated with data privacy and cybersecurity
within the FinTech ecosystem, and what potential solutions or strategies can be
implemented to address them effectively?

Research Methodology

The researcher utilized doctrinal research techniques in this research work, and the secondary
data was gathered from academic papers, journals, and research digests. Doctrinal analysis,
which is described as the synthesis of numerous rules, principles, and interpretative
guidelines, is a two-step procedure that begins with finding data sources and ends with
interpreting and analyzing the data. The materials below are used to comprehend the
fundamental requirements and the solution to the ethical challenges faced by the corporate
industry. The researcher's data gathering methods are that of case study and grounded theory.
This data-collecting approach entails techniques for capturing actions and occurrences. In this
context, these data are used to construct explanatory hypotheses of simple social processes.
This method of data collecting is utilized in the research paper to relate the recent topic with
the contemporary scams that took place especially in India in recent times.
Literature review

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 1. The fast expansion of financial technology (FinTech) has changed the conventional
landscape of financial services, bringing a myriad of innovations and disruptions. This
literature study seeks to offer a complete overview of the present trends and problems
connected with FinTech technologies. By integrating major results from academic
publications, research papers, and industry reports, this study intends to give insights
into the dynamic processes influencing the FinTech environment.3

2. The FinTech business is experiencing a myriad of developing developments that are

transforming the way financial services are accessed and provided. Noteworthy trends
include the proliferation of digital payments and mobile banking, the advent of
blockchain technology and decentralized finance (DeFi), the integration of artificial
intelligence (AI) and machine learning in financial decision-making, and the rise of
robo-advisors and algorithmic trading platforms. These changes represent a paradigm
shift toward more efficient, accessible, and technologically driven financial solutions. 4

3. One of the most significant effects of FinTech has been its involvement in increasing
financial inclusion and accessibility. According to research, technologies such as
mobile banking, digital wallets, and peer-to-peer lending platforms have increased
access to financial services for underserved and unbanked people. This inclusiveness
has the ability to eliminate poverty, stimulate economic development, and increase
financial literacy.

ANALYSIS

Fintech Challenges and Opportunities.

3
Kagan, J. (2023, April 28). Financial Technology (Fintech): Its Uses and Impact on Our Lives. Investopedia.
https://www.investopedia.com/terms/f/fintech.asp (Kagan, 2023) ( last visited on October 25, 2023)

4
Sursaieva, A. (2023, October 18). Fintech Trends That Will Change Future. Axon.
https://www.axon.dev/blog/fintech-trends-that-will-change-future (Sursaieva, 2023) ( last visited on October
25, 2023)

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One essential element of modern finance is fintech. The traditional perception of the financial
services sector has changed. People may handle their financial activities more swiftly and
simply with the help of fintech choices. It also has enormous potential to improve the state of
the global economy.

Fintech has made it possible for businesses and individuals to address new financial issues
brought about by social exclusion and other governmental restrictions during the coronavirus
pandemic. Fintech is a relatively new tool, yet it still confronts a number of challenges. In
this piece, we'll examine the potential and challenges associated with developing financial
software for businesses in 2022.

Opportunities For Fintech Companies

Opportunities For Fintech Companies

Sectors like commercial banks have a great chance to reconsider service delivery methods
and figure out how to take advantage of financial innovation. Numerous industries that use
Fintech's cutting-edge solutions are aware of its value and reap its benefits. Therefore, if your
firm already uses fintech services, take advantage of the favorable conditions to grow your
business. Financial technology markets and trends are expanding rapidly across many
corporate landscapes.

The financial services sector can create more cutting-edge and inventive company solutions
thanks to a number of current practices. In-depth study, report creation, corporate data
analytics, and a number of other strategies may be used to take advantage of the possibilities
that could present themselves. Let's talk about a few of the common approaches.

1. Digital Payment Services

Digitalization is one of the typical revolutions that have occurred in many industries,
including finance. Significant technical and structural changes are currently taking place, and

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they are quickly taking on the characteristics of the new normal. Convenience and efficiency
have increased with the emergence of digital-only banks. No one wants to physically visit the
bank, stand in long lines, and complete a ton of paperwork. Digital-only banks allow you to
create an account or make a money transfer from anywhere at any time. This is the advantage
of becoming digital. Digital-only banks provide several great advantages, like bill payments,
real-time analytics, and a quick overview of account balances and transaction histories.

1.1. Big Data and Analytics

Numerous financial organizations that compete in the market have been disrupted
and transformed by digitalization in the financial industry. Data and analytics have
advanced over the past ten years, and as a result, organizations have grown to rely
more and more on them.
Big data and analytics are being used widely to generate more customized and
targeted user experiences. Businesses utilize data and analytics to be competitive
because they enable them to enhance operations, optimize revenue, anticipate
customer needs and deliver personalized product offerings, and estimate demand.
Companies need to understand that analytics are there wherever there is large data.
Their link is unbreakable. Businesses need to make a deliberate and
comprehensive adjustment to these changes as the financial industry rapidly
moves toward data-driven optimization. Using the consumer data that has been
gathered to generate business outcomes will be highly informative.5

1.2. Blockchain Technology

Due to its quick adoption and growth, blockchain is quickly becoming a vital
component of financial institutions' operational infrastructure, including digital
payments, stock trading, smart contracts, and identity management. Financial
institutions are utilizing blockchain more swiftly because to its speed, security,
and global reach.

5
Suryono, R. R., Budi, I., & Purwandari, B. (2020, December 21). Challenges and Trends of Financial Technology
(Fintech): A Systematic Literature Review. Information; Multidisciplinary Digital Publishing Institute.
https://doi.org/10.3390/info11120590 ( last visited on October 25, 2023)

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 In contracts and the supply chain, Fintech companies must establish confidence
and demonstrate openness. They may obtain visibility throughout the supply chain
by using blockchain. It also handles quality assurance and performance
benchmarking. Financial services must immediately integrate blockchain into their
systems and seek out chances to expand FinTech.

1.3. Personalization:
Banking and personalization are two sides of a coin. Personalization in banking
always works in favor of businesses. In the financial services business,
personalization refers to providing a valuable service or product to a consumer
based on personal experiences and past data. The epidemic has forced financial
institutions to focus on the essentials rather than the nice-to-haves. A tailored
relationship also fosters trust.
The implementation of digital transformation is mostly motivated by enhancing
customer happiness and increasing sales. Financial Institutions are nowadays not
only competing against one another but also against technology behemoths. To
stay up with the changing environment, the financial services industry must
rethink its campaign measurement strategy in order to have a better understanding
of its consumers on a personal level.

1.4. Robotic Process Automation:

Can you imagine any banking process that is rapid and effective at the same time?
Well, you have got this one, then. RPA has proven records of being one of the
most efficient ways of managing financial transactions. RPA doesn’t really mean
that the process must be automatic, it can also mean bots. RPA’s rise can
undoubtedly be linked to the fact that they provide a high-quality user experience
and cognitive wealth-management advice at reasonable costs.
The need for Robo-advisors is increasing. People want to take advantage of the
current situation and are eagerly anticipating sophisticated investment options and
in-depth market analysis. To take advantage of this unusual opportunity,
businesses must prepare themselves to provide new features with Robo advisory

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 services. In the banking sector, they provide services such as account opening
methods, customer support services, or any other financial-related operations.6

2. Challenges Faced By Fintech Companies

There are various fundamental reasons why some organizations have not included fintech
services in their operations. Either they lack start-up service providers that can handle it for
them, or they are unsure of how to use fintech—that is information acquired later on.
However, companies who are currently utilizing fintech know that it gives them what they
want. However, a few identified pain factors prevent other companies from using fintech
solutions. A selection of them are listed below.

2.1. “Data Privacy and Application Security Challenges

Fintech companies keep a tonne of extremely sensitive customer data due to the
nature of their company, including social security numbers, credit card details,
income and investment information, and more. This information is always at
danger of being lost in transit due to the rise in the usage of phone and online
banking services. Because of this, the information is very sensitive. Therefore, risk
is a constant concern when it comes to the application security and data privacy of
fintechs. Information security is becoming more and more important.
because technical improvements have made it possible for you to remotely access
essential IT infrastructure. Complex data seems to be simpler to impede against
financial data sources. The absence of physical checks on crucial infrastructure
and endpoint devices that transport corporate data are further issues.”
2.2. Regulatory and Compliance Laws
Establishing a fintech company is not simple. Getting permission to launch a
fintech business has grown increasingly challenging as a result of fraud warnings
and data breaches. In addition to being challenging to follow, these regulations
also make it challenging for Fintech businesses to enter the Indian market.
Compliance rules should serve as a strict foundation to prevent fraud. They also
pose serious obstacles for nascent Fintech enterprises. Before they can start up,
fintech startups have to fulfill a lot of standards.
2.3. “Focusing on the Customer Experience
6
Neacsu, A., & Neacsu, A. (2023, August 18). 10 FinTech Trends for 2023: Navigating the Digital Finance
Landscape. HyperSense Blog. https://hypersense-software.com/blog/2023/08/18/10-fintech-trends-for-2023/
(Neacsu & Neacsu, 2023) (last visited on October 25, 2023)

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 There is a perception that finance is challenging. Despite this, fintech companies'
operating practices have rapidly evolved. When it comes to crafting an exceptional
user experience that transcends a basic user interface, there is still much work to
be done. Business innovation known as "conversational UI" focuses on a unique
user interface that mimics chatting with a real person. Users may receive
information from bots in the format that suits them best.
In terms of accessibility and ease of use, fintechs have led the way. Additionally,
opening an account with any bank is now quite easy. There is greater openness
when fees and levies are disclosed upfront. Trading platforms such as Robinhood
have simplified financial jargon.7”
2.4. “Changing Revenue and Business Models
Fintech companies should reevaluate their approaches to revenue and expenses, as
well as modify or expand their resources. Many firms are employing cost-cutting
strategies, such as staff layoffs and salary reductions, to deal with the economic
crisis. If the business is successful, several adjustments must be implemented in
enterprises. Changes in income sources and other business dependencies are
included in this. Your business models will also change as a result. Fintech
companies that handle contactless payments are repurposing their resources to
handle the increased amount of transactions.”
2.5. Personalized Services
Businesses find it challenging to adapt and provide individualized services, as is
well known. Despite being the most important and basic component of banking,
businesses find it difficult to provide. In today's world, personalization is
interacting with a user instantly via the channel of their choice. What clients
understand by customized services is that you have to offer a solution that is
specifically designed to meet their needs. They are not prepared to make any
additional concessions. Customers are also willing to embrace Fintech as a
financial wellness consultant. Some users are overwhelmed by a vast range of
options. But good customization ensures that they only see the options that are
relevant to them.8
7
Gad, A. G., Mosa, D. T., Abualigah, L., & Abohany, A. A. (2022, October 1). Emerging Trends in Blockchain
Technology and Applications: A Review and Outlook. Journal of King Saud University - Computer and
Information Sciences; Elsevier BV. https://doi.org/10.1016/j.jksuci.2022.03.007 (Gad et al., 2022) (last visited
on October 22, 2023)
8
Neacsu, A., & Neacsu, A. (2023, August 18). 10 FinTech Trends for 2023: Navigating the Digital Finance
Landscape. HyperSense Blog. https://hypersense-software.com/blog/2023/08/18/10-fintech-trends-for-2023/

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CONCLUSION

However, there are still obstacles in the FinTech industry that we need to get beyond. Fintech
businesses find it challenging to negotiate several government regulations and rules. But to
upend the financial industry, we must always find a middle ground between new technologies
and loyalty to the status quo. Conversely, new technologies and trends are hard for traditional
(Neacsu & Neacsu, 2023) (last visited on October 22, 2023)

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banking to adopt. Since mobile technologies have a positive influence on people's lives and
help institutions operate more efficiently, I believe they will become more commonplace in
the financial sector over time.

You may get in touch with Tactic, a reputable fintech app development company if you want
to design a financial app. We help you create the perfect app by adding the features and
functionalities that are required to deliver an excellent user experience. Think of these
technological challenges as a reliable way to become the financial industry leader.

BIBLIOGRAPHY

 Gad, A. G., Mosa, D. T., Abualigah, L., & Abohany, A. A. (2022, October 1). Emerging Trends in
Blockchain Technology and Applications: A Review and Outlook. Journal of King Saud University -
Computer and Information Sciences; Elsevier BV. https://doi.org/10.1016/j.jksuci.2022.03.007 (Gad et
al., 2022) (last visited on October 22, 2023)
 Neacsu, A., & Neacsu, A. (2023, August 18). 10 FinTech Trends for 2023: Navigating the Digital
Finance Landscape. HyperSense Blog. https://hypersense-software.com/blog/2023/08/18/10-fintech-
trends-for-2023/ (Neacsu & Neacsu, 2023) (last visited on October 22, 2023)
 Neacsu, A., & Neacsu, A. (2023, August 18). 10 FinTech Trends for 2023: Navigating the Digital
Finance Landscape. HyperSense Blog. https://hypersense-software.com/blog/2023/08/18/10-fintech-
trends-for-2023/ (Neacsu & Neacsu, 2023) (last visited on October 25, 2023)
 Suryono, R. R., Budi, I., & Purwandari, B. (2020, December 21). Challenges and Trends of Financial
Technology (Fintech): A Systematic Literature Review. Information; Multidisciplinary Digital
Publishing Institute. https://doi.org/10.3390/info11120590 ( last visited on October 25, 2023)

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