Fintech (abbreviated from “finance” and “technology”) refers to companies that apply technological achievements to make financial operations automated. In short, this is what helps a variety of businesses manage financial processes easier and more efficiently. Clients, in their turn, get more user-friendly and customised services.
It seems like fintech startups are a dime a dozen today. Just imagine — more than 26k of them appeared all over the world last year, with America being the leader — almost 11k. Such statistics prove the demand for fintech services. But what exactly are they? Just a few examples are mobile banking, mobile payments, crowdfunding platforms, cryptocurrency, blockchain, trading, and many more. And you’ve probably heard at least a few of the top, most influential fintech companies like Robinhood, Stripe, Clyde, Kraken, Wise, or Gemini.
Thousands of such small and big fintech businesses are taking over the world of banks and payments. This is a booming industry that’s surely on everyone’s mind today. Investors, business owners, consumers, bankers — all are talking about it. This inevitably leads to lots of rumours, misconceptions, and myths. Some believe this is only for the young and rich. Some think this is just a bubble. Others are afraid of the risks fintech comes with.
DashDevs wants to dispel those myths so you, as a business owner, don’t lose a great opportunity to enhance and accelerate your company’s growth. Satisfy your curiosity and read the 9 most common misconceptions right below!
Myth 1: FinTech comes with a lot of risks
Today the topic of risk management in fintech has become a source for many rumours and myths. Let’s try to differentiate facts from fiction. On the one hand, new types of fintech risks are indeed frequently appearing due to the fast growth of the industry. To name a few — fraud, merchant, consumer, or credit risks. This creates huge pressure for fintech firms and forces them to elevate their risk management capabilities. That’s why their security measures are extremely strong. Let’s give you a few examples of fintech mobile application shielding:
1. Code Obfuscation. The technology is developed to modify the mobile application in such a way that no one can disassemble its code. It makes the target unachievable for hackers.
2. Runtime Application Self-Protection (RASP). This technique guarantees no hacker is able to inspect the app and learn how it works. Even if someone tries to break in, the system will notify you about the possible attack.
3. White-Box Cryptography. It doesn’t allow hackers to steal secret keys from the binary implementation.
Myth 2: Fintech is solely for large markets
Many still believe that fintech is only for privileged big corporations and enterprises located in cities like Silicon Valley, New York, London, and Hong Kong. Well, no one can deny that they indeed make up a huge part of fintech’s total value, which is predicted to reach $324b by 2026. But fintech in emerging markets (EM) is also experiencing steady growth. Fintech funding increased prominently in India, Africa, and Latin America — over 9k fintech start-ups were launched in those regions.
Because of scarce access to financial services, low income, underdeveloped technology solutions, and weak infrastructures, the modern fintech services were out of reach for smaller markets. But now the world is changing, and EMs are regarded as fertile ground for fintech. There are simply more opportunities to offer customers better and less expensive financial services. It’s a win-win situation, but many just don’t see it.
Myth 3: Fintech is only for younger people
Yes, trends in fintech differ for all generations. And yes, it’s hard to deny that millennials and Generation Z are the most frequent users of FinTech services today (approximately 66% and 63% respectively). The main reason is their intuitive knowledge of technology. In short, they grew up with it and naturally became extremely tech-savvy. But one shouldn’t underestimate the importance of baby boomers in the fintech business. The thing is generations have different needs and fintech isn’t limited to classic banking services.
What about insurance, equity funding, trading platforms, or e-commerce? By the way, speaking of the latest, it’s predicted that baby boomers will be generating about 51% of urban consumption growth in developed countries in the period through to 2030. This is, if you please, $4.4tr. To cut a long story, fintech has a lot to offer for all age groups. Even today, 27% of people above 50 have become frequent users of FinTech services. And the number continues to increase — they’re now the fastest-growing segment of fintech consumers.
Myth 4: Fintech is disrupting banking
The media continues to depict banking and fintech as two sworn enemies, but the truth is both are peacefully coexisting. Moreover, we’re already witnessing their collaboration. For example, digital account opening, mobile wallet, fraud management, and subscription management are just a few areas where fintech banking is thriving. And the tendency is just starting to gather pace. Thus, approximately over 40% of banks' executives in the United States claimed to be very or at least somewhat interested in such a partnership.
Today, fintech banking as a service is possible due to a few types of partnership models. One of them is referral partnership. When banks can’t fill the gaps in their service offerings on their own, they refer clients to relevant fintech companies. In such a way, everyone wins! First, users get access to better financial services. Second, banks are paid a commission for marketing access to a customer base and also maintain a great relationship with their customers by improving their experience. Third, fintech platforms make a profit from their services. So, as you see, fintech isn’t disrupting banking at all. It’s just a matter of choice — to be friends or foes.
Myth 5: Fintech is only about money
The word “fintech” speaks for itself — the term relates to any company that applies technology to the world of finance. Consequently, everyone is associating it with money. Indeed, no one denies fintech has a lot to do with payment processing, lending, or online & mobile banking. That’s why fintech investment is usually concentrated in those areas. But this isn’t the only identifier of its key sectors and trends. Here are a few other directions of financial technologies:
- Security. Fintech companies provide financial institutions with a clearer and more reliable approach to data processing. For instance, authentication, encryption, secure messaging, and many more.
- Insurance. FinTech is taking the insurance industry to a brand-new level. This is possible through various innovations like risk-free underwriting, on-the-spot purchasing, activation, and claims processing.
- Investment management. Fintech uses innovation (like AI or Cloud) to make investing more efficient and convenient. And if investment institutions want to remain competitive, they’ll have to adapt these new features like robotic advisors, automated brokers, or micro-investment networks.
Myth 6: Fintech solutions should be cheap
Another misconception is that it’s much cheaper to develop your own fintech solution from scratch rather than using function as a service (FaaS). But this is far from the real facts. The cost of a digital solution, in particular, the cost to develop a fintech app, can’t possibly be low. Here’s what the final price depends on:
1. Type of an app. There are banking, lending, investment, insurance, and financial management applications. For example, the first one takes much more time and resources to develop and, hence, more money.
2. The hourly rate of the developer and other experts. It varies greatly and depends on the country and the experience of a specialist. On average, senior-level developers charge $30-50 per hour. Development time also varies but usually, it’s not less than 1500 hours. By the way, if you need help with your project cost estimation, DashDevs can help you with that as we’ve delivered over 500 digital products so far.
3. Functionality of the app. Obviously, the more functions and features you want your app to have, the more resources it’ll require for its development.
Myth 7: Fintech is just a bubble
Let’s admit it — whenever something new and revolutionary arises, there are critics claiming this is just a bubble that will soon blow out. The same happened to fintech when it first appeared, or more precisely when its modern history began in the 2010s. This was the time when distrust towards the traditional banking system started to increase, and it provoked the emergence of new players in the world of finance.
This is 2022 already, and the industry is still thriving. Does it look like a bubble? Here are a few facts to prove it’s not:
- Fintech services are used by more than 210m of Americans (this is about 65% of the whole population).
- Fintech adoption rate is impressive — 50-75% depending on the service (for example, payment or insurance).
- Thousands of fintech startups are launched every year. There were over 10k of them in America, over 9k in the EMEA region (Europe, the Middle East, and Africa), and 6k in the Asia Pacific region last year.
Myth 8: Regulations will pull the plug on fintech
Whether you like it or not, but financial markets cope and, highly likely, will always deal with governmental regulations. Don’t perceive it as something bad or good, but rather accept it as something obligatory and inevitable. Anyway, the point is — fintech leaders, of course, know it all about possible barriers and limitations and don’t leave this matter unattended. On the contrary, they’re looking for the possibility to partner with the government.
Moreover, many governmental representatives in a number of countries demonstrate interest and extensive support towards fintech businesses. All because their ultimate goal is similar — get citizens satisfied by providing them with better and more quality financial services. For example, the UK Chancellor, Rishi Sunak, outlined the plan on how to advance and scale up the UK fintech and the financial sector in general. He believes that even though the country is already known for being at the forefront of innovation, his suggestions will make the financial markets even more efficient.
Myth 9: A new fintech product always has to be unique
Many companies and businesses owners are afraid that if their fintech solution isn’t unique enough, it won’t score a big win. Like, no one will need it because fintech is always associated with innovation. But the truth is that you don’t have to be a game changer to satisfy your end-users. They don’t need you to discover America again. They rather require quality, cost-effective, and user-friendly services.
Let’s recall one important fact again — 26k of fintech startups were launched last year all over the world. Do you think all of their ideas were innovative and absolutely unique? Of course not. The secret of your success is different — think who your clients are and how you can be helpful to them. What can you change? What can you add to your services? And if you need help with that all, DashDevs is the place to go as we know the ins and outs of fintech.
Create Your Own Fintech Digital Product with DashDevs
It seems like rumours about fintech will never die away because the industry is blooming and new technologies, algorithms, and services emerge every day. In such a case, your main task, as a business owner, is to tell lies from the truth. And the truth is that fintech is here to stay. It helps companies satisfy customers' needs faster and with fewer resources. It brings results and profit.
Are you still hesitating? Do you still have any questions or concerns? DashDevs is here to assist you with any of your requests. You’re always welcome to contact us, so we can provide you with qualified consulting in fintech application development.