It’s easy to assume that the FinTech industry has officially ‘arrived’. After all, as of 2017 there were 13 FinTech startups around the world that were valued at more than US$1billion (€840million). But the truth is that the industry is still finding its feet.
We’ve all seen great examples of ground-breaking innovation in the financial world, made possible by the technological genius and lightning-fast agility of FinTech companies. But as more and more people around the globe become involved with FinTech products and services, and as the whole industry becomes more mainstream as a result, the demands and expectations on FinTech companies are increasing. And this is especially true in the case of security.
Living in an age of cybercrime that is constantly growing in sophistication, digital security has never been more important. It’s an area in which traditional banking organisations have consistently led the way, ensuring that their customers’ accounts, money and personal data is subject to high levels of protection and encryption where needed.
So as FinTech companies innovate with alternative solutions to traditional banking, customers making the switch to use those solutions rightly expect the same level of security that they’d get with their ‘old’ bank. But there’s a common theme emerging that FinTechs are lacking the resources – both human and financial – they need to get their security up to scratch.
And that isn’t the only security-related issue they face. The pace of developments within the industry and the rush to get new products into the market means that security considerations may often find themselves sidelined. And while the relative lack of compliance constraints have allowed FinTechs to thrive in the past, the new climate of increasing regulation means they will either have to start working within a regulatory framework or risk severe consequences.
Combined, these difficulties are significant in stopping FinTech firms from reaching their full potential. For example, a recent study has found that more than 70 per cent of banks are concerned about partnering with FinTech firms because of the security risks, while nearly half cite regulatory implications as a similar deterrent.
The customers themselves are wary of FinTech security, too. Last year’s FinTech Report conducted by British newspaper The Daily Telegraph found that the three biggest consumer worries about using FinTech products were security of investments, protection of personal data, and cyber-attacks.
This puts many FinTechs in a Catch-22 situation. To be able to solve their security challenges, they need to scale upwards and boost their income that they can invest into their security. But those very same challenges are a block to gaining trust from potential partners and customers, therefore making it more difficult to generate the growth that they need.
It sounds like an impossible hole to get out of. But in reality, it’s where service providers like you can make the difference.
As FinTechs are generally unable to achieve the security provision they need on their own, you’re in an excellent position to deliver solutions that can keep them secure at a price point that’s sustainable for them. The agility of FinTech firms mean you can get them set up with new solutions, and allow them to start feeling the benefits, very quickly.
And business benefits for you as a service provider don’t have to stop there. Along with security protection, you’re then in a strong position to deliver other capabilities or services to the FinTech client. Whether they need a more effective cloud infrastructure, or want to explore artificial intelligence capabilities, the opportunities to boost your own bottom line should be much easier to come by.
You can enhance your existing clients’ FinTech solutions, and reach new markets and clients, when you partner with IBM.