The innovation in the finance sector has led to substantial changes in the economy. Businesses have also experienced drastic changes at an alarming pace. However, in the world of finance, technological advances have enabled the industry to develop in a remarkable way.
Fintech is gaining a lot of momentum. The industry attracted $2 billion in investment last year. The company and the customer can align interests in ways that are more efficient and economical. When the Fintech industry grows, it has the potential to deeply influence both large businesses as well as their customers.
What is Fintech?
The fintech industry aims to revolutionize and automate financial services, turning them to become more efficient and effective. It facilitates consumers, businesses, and companies to organize their payments and financial transactions conveniently.
Over the years, the fintech industry has grown exponentially. Americans have the most fintech startups in the world, noticeably 10,605 startups as of February 2021.
Globally, India is among the leading Fintech markets. A market worth $31 billion is being developed in India for fintech, which will expand at an anticipated 22% compound annual growth rate (CAGR) to $84 billion by 2025. A surge in the adoption of fintech fueled by Machine Learning (ML), data analytics, and Artificial Intelligence (AI), automation has remodeled the financial sector.
Fintech companies can use these technologies to analyze massive amounts of data using algorithms designed to detect trends and risks, fraud activities, and analyze data directly to take or recommend intelligent actions based on this information.
Is Fintech Changing the Way Tech Companies Do Business?
eCommerce players such as Flipkart have incorporated fintech business models to take advantage of the growing trend of cashless payments. For instance, consumers have the option of ‘buy now, pay later’. In addition to this, Flipkart offers mobile phone insurance under its Complete Mobile Protection program. Moreover, it has also built a digital wallet that is compatible with UPI. The payments market in India has been entered by global players like Google, WhatsApp, and Amazon.
Financial technology companies that are in the transaction delivery space create free products, such as expense management apps, in order to collect customer information and cross-pollinate it among the business to determine a customer’s likelihood of paying premiums, purchasing real estate, and investing in mutual funds.
Financial companies are utilizing technologies with the help of Blockchain or Artificial Intelligence, Machine Learning, etc., to assist businesses to manage their financial activities like accepting payments, paying bills, and other financial app development solutions as needed. In addition, they support consumers, business owners, and companies to understand investment risks and purchasing alternatives before making a buying decision.
Fintech applications are being adopted by many leading financial institutions and startups to optimize their financial operations and reduce operational expenses.
Types of Fintech Business Models
Alternative Credit Scoring
Due to strict and outdated credit scoring criteria, many self-employed individuals cannot obtain conventional bank loans. Companies like Nova Credit, which provides credit ratings based on alternative data sources like social signals and percentile scores among similar loan groups, are taking a new approach. Over time, an intelligent and self-learning algorithm combined with all these qualitative factors could lead to more informed lending decisions. For instance, a lender can avert loan recovery by determining negative profiles based on social presence prior to loan disbursement.
Peer to Peer Lending (P2P Lending)
It is estimated that Peer to Peer (P2P) Lending Market will grow at a CAGR of 26.6% from USD 138.71 Billion in 2020 to USD 912.43 Billion by 2028. A person uses peer-to-peer lending when they want to borrow money from another person. It is also possible for businesses to lend money to other businesses in the same way. Investors can benefit from this model, which makes it easier for them to make loans, so they can earn higher returns than from the debt market. By creating platforms, FinTech companies like Funding Circle take a fee from the repayments of borrowers after they match lenders with borrowers.
An online payment gateway lets customers pay for a product on a retailer’s site. Nowadays, banks charge high fees for debit cards, digital wallets, credit cards, and cryptocurrencies. But, FinTech companies are using a model that permits them to consolidate all of these payment methods into a single app that online merchants can effortlessly download and deploy on their website. You can hire an eminent payment app development company to develop applications like Alipay, iZettle, Stripe, PayPal, and so on which are ideal for businesses selling physical goods and services to customers.
Insurance technology, or Insurtech, is built using digital technology, and it is usually used for sales and distribution, lead management, underwriting, claims management, and renewals. The traditional insurance industry is starting to adopt a range of dynamic technologies such as artificial intelligence, data analytics, and blockchain in order to help agents set up virtual branches, make claims faster, and maintain them more efficiently.
Digital Insurance, for instance, uses Blockchain app development services, so that claims can be processed faster. Another new-age platform that consumers can access to compare and buy insurance is PolicyBazaar, Acko, Turtlemint, OneAssist, RenewBuy, and Coverfox.
Digital wallets are systems that securely store payment credentials, usernames, and passwords for diverse payment methods available as mobile and web app development solutions. Through near-field communication technology or online transfers, users can easily and quickly purchase using a digital wallet.
A mobile wallet can be used in combination with a mobile payment system, enabling customers to make transactions with their smartphones. You can also utilize a digital wallet to store information about loyalty cards and digital coupons. Paytm, Ezetap, Freecharge, JioMoney, JusPay are just a few of the digital wallet options.
The idea of crowdfunding is to raise funds from many lenders by leveraging a platform where investors can showcase their ideas, funding needs, business plans, and potential. The investor can view the communication of the investees, interact with them, and find out what option is right for them. In the pooled funding mechanisms, each participant (investor) provides a small amount, and the money is used by the beneficiary (investee) to support the declared cause.
Consider the possibility of your bank going entirely online – without a physical office, without bank tellers, without postal mail. Many banks now offer both individual and corporate accounts that rely entirely on digital infrastructure. As per the Statista report, 61% of Americans used digital banking in 2018, which is now forecasted to rise to 65.3% by 2022.
N26, for example, offers no-frills banking services for individuals and businesses through its complete digital ecosystem. This is almost the same business model as a bank with physical branches, and the customer benefits from reduced rates because of the enormous savings in workforce and rent.
Do you ever wonder what it would be like buying stocks and mutual funds without having to pay a commission? Robinhood, for instance, offers investors the opportunity to trade for free in return for their data. Data from this source is used by high-frequency traders, who can then manipulate the asset’s price. Despite paying a slightly higher price for the asset, the investor still gains profit because they save money from trading fees, which is somewhat higher.
The Fintech sector, with its focus on insurance, is taking all traditional services to the digital world, along with digital banks. The Fintech companies providing life and health insurance offer their prices at variable rates based on the customer, which allows them to offer aggressively lower rates compared with traditional insurers. By combining these types of insurance with customized marketing, insurance companies can create new business opportunities that haven’t yet been explored. An example of this is Lemonade, an insurance company that provides home insurance.
The API-based bank-as-a-service platform serves as the backend that hosts individual Fintech startups and synchronizes them with any traditional banks. Financial institutions can use platforms such as these to introduce products to new markets and quickly start their businesses. It allows non-banks to expand their product offering and reach new markets quickly and efficiently.
Steps to Create a Fintech App
Developing applications for fintech differs from other categories of app creation. Fintech app developers face various obstacles, and many aspects need to be considered during development, among which compliance is of paramount importance. Here’s a brief overview of steps that you can follow to develop a market-ready fintech app:
Decide on the Right Niche
You probably know that fintech applications can be of various types. Before investing in fintech app development, be sure that your business goals have been carefully analyzed (unless you have selected a niche that fits your business requirements). In either case, you can seek assistance from skilled developers and start with the pre-development process, during which they can identify your target audience, your goals, and the challenges you need to address.
This will not only provide a clear picture but also assist us in making informed decisions. Knowing the niche allows us to discover various aspects of the competitors’ offerings, such as:
- Access to applications
- Unique selling points and features
- Addressed and neglected pain points
- Weaknesses of their approach
Meet Compliance Requirements
Applications created for the fintech industry should comply with industry regulations and requirements. If you fail to please even a single customer, you run the risk of losing all your investments, as well as causing extensive damage to your reputation.
Several financial protection systems are designed to track compliance requirements, including KYC, AML, and others. While you’re at it, you also need to adhere to privacy laws such as CCPA, PIA, GDPR, and LGPD to meet the necessary security parameters and gain customers’ trust.
Identify the Features of the Financial App
The features you include in Fintech Apps will vary depending on the niche you choose, but let’s walk through the must-have features.
Fintech applications need to be secure to be successful. Since fintech applications contain such sensitive data, cybersecurity is of greater importance than ever before. The challenges of fintech are even more daunting when you lack an adequate security infrastructure to support them. The security of fintech applications should begin with the login process. If you want to protect your users before they carry out any financial transaction or even log in, make sure you provide them with top-notch security measures such as facial locks, voice recognition, or fingerprint locks.
You can use push notifications to keep your users in the loop about the app’s happenings and keep them engaged. Your users can also use these updates to monitor their finances, such as balances, failed and pending transactions, and more. Push notifications aren’t always feasible in the Fintech space, but users report being among the most appreciated features.
Monitoring Budget and Savings
Anyone who wants to stay on top of their budget and ensure they end the month with savings needs a little help, whether a great financial planner or one of your users. What you can do is offer them an application that allows them to do so. Make it easy for them to track their daily expenses and the amount of savings. Such an approach would be of great assistance in helping you build an impressive and loyal user base.
It’s an obvious choice here. Fintech application development isn’t complete without its core features. If you choose a niche, it might be prudent to consider some or all of the features listed below:
- Connect bank accounts
- Check balance
- Wealth Management
- Access and pay bills
- Make or receive digital payments
- Transfer money
- Personal finance features
Plus much more.
Reach out to a dedicated team with the requisite experience to determine which features best align with your needs.
Conversational AI Chatbot
We live in a world where artificial intelligence is ubiquitous and permeates into our daily lives. The simple act of searching a web or app screen to answer a specific question is just too time-consuming. All our customers have to do is ask Alexa for help, and the information is at their fingertips. Isn’t it different in fintech?
If you want your fintech app to be loved by customers, you should build a customer-centric app. To develop a similar app, you can contact a prominent AI development company. It is possible to provide them with automated assistance, such as a virtual assistant or a chatbot, to find answers to their questions or use the applications you provide.
Personalized marketing is crucial to success today. Fintech is slightly behind with personalization, despite most industries already using it. That doesn’t mean you have to be one of them. In marketing, you might think about integrating personalization based on user tastes. You can optimize your marketing strategy by directing your budget into the places where people are most likely to make purchases.
Decide on a Team Structure
Now that you have your fundamentals in order, it’s time to start putting together a team that can take your on-paper plans and makes them real. You can hire the following resources for your fintech application development:
- Front-end developers
- Backend developers
- Business analysts
- QA specialist
- Designing experts
- Project manager
According to your needs, you can also add or decrease the number of team members.
Fintech Application Design
Stand out from the crowd with the right design and features. But designing applications for Fintech is not like designing applications for other fields. Due to their preference for security, fintech users have different needs, so you need to deliver an experience that meets their expectations. To help you understand things when designing a fintech application, we compiled the key points:
- Simple is best. Avoid overburdening your users with complicated elements that they cannot access.
- Security should not be compromised. Be sure to include it in the design process at each layer.
- Make sure users have a seamless experience on any device they choose.
- Minimize complexity using micro-interactions.
- Make sure that every element is tested, including font style and font color. Be flexible to change anything that looks off to your audience.
Development of Fintech MVPs
Making the most of your efforts requires MVPs in addition to being a suitable business investment. Your MVP can start small and grow large, allowing you to meet the consumer’s demands while building your app. An MVP is a prototype of the final product that provides only the basic functionality.
Quality Assurance and Launch
Analyzing quality is an integral part of any development process. Additionally, various types of testing methodology ensure that deliverables are of the highest quality and are up to par.
Most Popular Fintech Product Examples
Michael Gokturk founded Payfirma in 2010 to allow customers to pay any time, anywhere, and at any location. The company helps businesses accept debit and credit card payments online via mobile, e-commerce, and in-store payment terminals under one merchant account. Transactions at Payfirma are processed using a cloud-based platform, which allows business analytics to be accessed quickly, such as sales data.
MANTL helps banks and credit unions integrate omnichannel account platforms within their core systems to improve backend tasks and grow deposits. Financial institutions rely on the company for tools that enable them to customize user experiences and branding, implement data visualization tools, and automate KYC decisions in order to increase conversions and simplify deposit processes.
MOGO Finance Technology Inc. (MOGO) is an online lending platform that gives a variety of credit solutions to millennials, including prepaid credit cards and short-term loans. MogoCrypto was released in 2018 for buying and selling Bitcoin cryptocurrencies. Mogo had more than 1.6 million registered users as of July 2021. It offers quick access to a competitively priced service and emphasizes the user experience, making it the Uber of finance.
Cathay Innovation company Chime (also a CHIME) reimagined how banking works for the underbanked in the US. According to reports, Chime is expanding rapidly, reportedly having over one million customers. Their main strength is their method of generating revenue. A Chime Bank account is free of charge and includes no surprise monthly charges and overdrafts. A pioneer of mobile banking, the most innovative offers no-fee accounts and automatic savings, in addition to early paydays via direct deposit.
Founded in 2006, Shopify Inc. provides multi-channel commerce platforms for small and midsize businesses. It was started in 2004 by Daniel Weinand, Tobias Luke, and Scott Lake in Ottawa. With the help of a Shopify development company, developers allow merchants to improve the customer experience as they can directly interact with them and can manage multiple channels. The company served approximately 175 countries as of April 2021.
How Much Does It Cost to Create a Fintech App?
Business operations are tailored to budgets and budgetary time constraints, so taking on debt must be planned before it is too late. There can be no question that everyone would like a secure and convenient way to make a payment. Yet, not everyone can record their finances using an app. Thus, all types of financial transactions must have a secure, transparent, and effective app.
In some countries, app development costs are more expensive than others, and we wouldn’t get the exact cost if we took a standard cost. It may cost $60 to $80 in India to hire Fintech app developers, whereas it is usually between $100 and $120 per hour in the US.
The single-platform fintech app development cost with basic functionality is between $25,000 and $35,000. The cost of building a feature-rich fintech app with best-in-class features ranges from $40,000 to $70,000.
Apps with complex features cost more to develop for Android and iOS. Depending on the requirements, a user interface such as this one will cost you between $50,000 and $150,000.
Why is the Fintech Model Advantageous?
High Level of Convenience
In the financial sector, predominantly mobile connectivity is practiced. This will substantially increase the number of individuals accessing the Internet. In addition, it increases the adeptness and effectiveness of transactions. Also, a business will have a better chance of streamlining its customer service with an improved all-around customer experience. In addition, consumers have many options available to manage their finances, such as mobile devices and tablets.
A fintech company like Adyen offers a unified platform of payments, as well, adding advantages to the company. Clientele includes many large companies and major companies such as Uber, Spotify, Burberry, Netflix, L’Oréal, Facebook, & Microsoft.
Robo advising is relatively fresh and one of the crucial divisions of fintech. Customers of these services are asked specific questions, and algorithms are used to develop a customized investment strategy. An investment account typically does not require a minimum deposit to get started, and advisers can select low-cost assets. If you bought assets or wanted to keep them, you will pay for the services later. Balances and asset allocations do not incur additional fees. In addition, it is one of the easiest ways to plan an investment or banking plan for the future.
Further Service Scope
Innovation in finance is made possible through fintech. This broadens their reach and area of service. Mobile technology is getting a lot of attention from financial technology companies. More people will be able to take advantage of these services. Transactions will also be more convenient and of better quality. Users can also access their accounts through smartphones and tablets. As a result, the company’s operations will be streamlined.
Taking advantage of today’s technology is essential for financial institutions. The same applies to high-tech monetary services. This will enable people to use financial services with more confidence. The most current security measures should be used. In addition, mobile technology has led to significant investment in security. This allows consumers’ data to be protected. This includes biometric and tokenized data. The use of data encryption among businesses in this field is among the latest security solutions.
Greater Acceptance Percentage
Most of the banking system needs to focus on the approval rate as a distinguishing factor. With the use of fintech, this process is now much more straightforward. Digital lenders are available online, and approval can take place within one day of requesting them. They can access all types of services they require by providing the information needed to process their data. It is credited to the automatic process enabled by artificial intelligence in the banking sector, which is expected to accelerate the process faster than what a human can deliver.
Both consumers and businesses find fintech to be the most cost-effective option. Since there are no hidden fees, it is more economical than traditional options. Furthermore, it enables a unified user experience by integrating physical and digital payment methods together. Hence, it gives companies a competitive edge. Convenient mobile payment options and reduced transaction costs also make this an attractive option.
There is no denial that fintech has made a significant impact on the way businesses and consumers conduct business, and it is bringing innovation to technologies and financial sectors from all over the world. The Fintech development company can assist business owners in their financial models allowing them to make better decisions.
The Fintech industry has undoubtedly shaped the future of next-generation financial services. Despite a few hurdles facing fintech start-ups in the current business environment, it is apparent that the fintech industry will prosper, no matter where it operates.