Top 10 fintech challenges and its solutions

The fintech industry is booming, with the global market expected to reach USD 1.15 trillion by 2032. However, growing a fintech product comes with significant challenges.

Fintech companies face risks like data breaches, which can lead to heavy penalties and loss of trust. For instance, Evolve Bank suffered a ransomware attack in 2024, leaking customer information. The average cost of a data breach is $4.88 million.

But data security isn’t the only hurdle. From our experience building fintech apps for clients, we’ve encountered various technological, operational, and business challenges that SMBs and startups must overcome.

In this guide, we’ll explore these challenges and provide solutions to help you scale your fintech product successfully

Top 10 fintech challenges and how to address it

New fintech companies rush to secure funding, prove their concepts, and launch products quickly. However, in their haste, they may overlook or struggle with several important challenges.

Growth management issue

Many fintech startups face difficulties scaling when they experience rapid user growth. If they can’t expand their tech resources to handle increased traffic, user satisfaction drops. Slow-loading pages, transaction failures, or app crashes can harm both customer and investor trust in your business.

Fintech products depend on servers, databases, networks, and other tech infrastructure to deliver reliable, fast performance. But scaling your fintech software isn’t just about fixing tech problems. You also need to consider customer support, data handling, and security risks.

How to address it

Make scalability a top priority early in development, not an afterthought. This doesn’t mean you need massive resources from day one. Instead, focus on choosing the right tech stacks and development approaches.

Here are some ways to build scalable products:

• Use secure, on-demand cloud infrastructure for your fintech solutions.
• Design with microservices instead of rigid, monolithic code.
• Use Agile and CI/CD practices to respond quickly to growing needs.

Regulatory compliance issue

Another big challenge is navigating the various banking and financial product regulations. Requirements differ based on your operating country and target customers. Failing to comply can lead to steep fines.

For instance, fintech bank N26 was fined $10 million by German financial authorities for delays in reporting suspected money laundering cases.

How to address it

Staying up-to-date on fintech rules helps you follow the law and protect your customers. To do this, you need an in-house team to check that your product meets all the required standards.

To help our clients meet these rules, we:

• Use data protection methods like encryption, user checks, and data location controls.
• Update fintech products quickly when rules change.
• Use AI and machine learning to automate rule-checking and risk management.

Also read Know These 9 Steps Before Developing A Fintech App

SaaS/BaaS vendor challenge

Startups often use SaaS and BaaS vendors to save money. This lets them use existing services like payment gateways, marketing tools, and customer tracking without building them from scratch.

While this saves money at first, most founders face these problems later:

• Vendor lock-in. Startups become too dependent on the service provider, so any changes in policies or costs have a big impact.
• Data clarity and control. When you send data to another company, you can’t control how it’s stored or protected. This can cause problems in some areas where laws require fintech startups to follow specific data storage and protection rules.
• Limited innovation. Relying too much on SaaS/BaaS vendors can limit product growth. You might find that you can only customize features the vendor offers.

Eventually, startups need to rethink their SaaS/BaaS strategy to keep growing.

How to address it

Like it or not, startups can’t completely stop using SaaS/BaaS vendors, especially for crucial services like banking or cloud storage. However, you can plan how to work with these providers without limiting your ability to grow.

It’s often wise to team up with fintech developers who know SaaS/BaaS well and can blend them in while keeping potential limits in mind. For instance:

• Avoid getting stuck with specific service providers.
• Keep several options ready that you can easily switch between.
• Don’t rely too much on third-party solutions as they always have limits. Instead, create your own answers or use extra services to reach your goals.

User experience and keeping customers happy

Many fintech companies struggle to attract and keep customers. Even with fancy tech, their apps might fail if they’re not easy to use.

Imagine you make an app for sending money to other countries. If it’s hard to use or doesn’t work well, people will switch to other apps.

Missing small things, like showing how much money you have on the main screen, can make people unhappy. When an app isn’t handy, users will leave.Discover more.

How to fix it

The best way to keep customers is to focus on making the app easy to use. Of course, a money app must be safe, which means checking who you are.

But it’s just as important to make it user-friendly. For example, you shouldn’t have to prove who you are many times just to see how much money you have. Instead, the app can have different levels of safety for different tasks.

Taking too long to launch

Fintech startups can’t afford delays when making their products. Delays cost money and growth chances. But delays often happen if you try to build or grow a fintech app by yourself.

Founders might get stuck trying to follow all the rules. Plus, you have to deal with tricky tech stuff. Remember: building a fintech app, even a simple one, means:

• Putting together lots of software parts
• Adding other companies’ services
• Setting up and taking care of databases

Also, you need to test everything a lot before people can use it.

How to fix it

Break down the work into smaller, checkable steps. This will lower your risks and speed up making your fintech app. For example, we tell our clients to test their ideas with mock-ups before making a basic version. Then, we slowly add more useful features.

Also, you can save time by talking to fintech experts who know about rules, safety, and other problems startups often face. They’ll help you avoid mistakes.

User experience and retention hurdle

A common issue for fintech firms is struggling to attract and keep customers. Even with cutting-edge tech, fintech apps may fail if they don’t offer a great user experience.

Imagine you create a P2P payment app for international money transfers. If your app is hard to use or unreliable, users will switch to rivals.

Missing key features, like showing account balances on the main screen, can hurt user experience. When an app doesn’t meet users’ needs for ease of use, it will lose customers quickly.

Solution

The best way to keep users is to focus on UI/UX principles when building a fintech app. Of course, a fintech app must be secure, which needs verification and other safety measures.

But it’s just as important to balance security and user-friendliness. For instance, users shouldn’t have to log in multiple times to check their balance. Instead, the app can use different security levels for different tasks.

The key is to map out the whole customer journey and design the app to support it. Our UI/UX designers are experts at creating engaging solutions based on user needs.

Slow time-to-market challenge

Fintech startups can’t afford delays in product development. Delays cost money, growth, and opportunities. But delays often happen if you try to build or grow a fintech solution on your own.

Founders might feel overwhelmed trying to follow various industry rules. Plus, you have to deal with complex tech issues. Remember: building fintech software, even the simplest kind, involves:

• Putting together many software parts
• Integrating third-party services
• Setting up, moving, and managing databases

Also, you need to test everything thoroughly before launching.

Solution

Break down the development into smaller, checkable goals. This will reduce risks while speeding up fintech development. For example, we suggest our clients test their ideas with prototypes before launching a basic version. Then, we slowly add more useful features.

Also, you can save development time by talking to fintech experts who know about rules, security, and other issues startups often face. They’ll help you avoid common mistakes.

Cybersecurity Risks

The biggest worry for CTOs scaling fintech software is data security. Fintech apps are prime targets for cybercriminals who constantly seek ways to steal customer data and break into accounts.

The threat landscape has evolved, making strong defenses more crucial than ever. In 2023, the finance sector saw the highest number of data breaches across industries, according to a major financial services provider’s report.

We can’t stress enough how real and costly these threats are. A study found that cyberattacks cost US small businesses an average of $200,000 – an amount many can’t afford to lose. It’s vital to regularly update your security approach or, better yet, build robust fintech apps from the start.

How to Address It

To protect your business from cybercrime, it’s crucial to build security into your app. Prioritize data security and customer privacy through protective measures and secure development practices.

Small businesses can:

• Encrypt all data their fintech software collects, stores, and sends
• Ensure third-party services meet data privacy rules and security standards
• Use secure coding to prevent hidden vulnerabilities
• Do regular security checks to find and fix weak spots quickly
• Add features like two-factor login, security alerts, and fraud detection

Check our proven  ways to keep your fintech app safe

Keeping Up with Tech Advances

Your ability to grow and compete depends on how quickly you can use new technologies like artificial intelligence (AI), machine learning (ML), and blockchain.

For instance, banking software with an AI chatbot can help customers 24/7 while cutting costs. Using machine learning for credit scoring helps lenders reduce risk when approving loans.

However, not all small businesses are ready to update their fintech products with the latest tech trends. This puts them at risk of falling behind more adaptable competitors if they stick with outdated systems.

How to Address It

To stay relevant in the fast-changing fintech world, you need to invest in learning and growth. This means spending time and money to try out new tech like AI, blockchain, and automation, and figuring out how to use them to improve your product.

Keeping Up with Changing Rules

Financial regulators worldwide are always updating their guidelines to match the current market and protect customers. Small businesses often struggle to keep track of these changes and update their products accordingly. This puts them at risk of big fines or losing their license to operate in certain areas.

Some countries have more rules than others, which can make things even harder. For example, if you’re selling your fintech product in the US, you need to follow rules from the SEC, CFPB, CCPA, and other state-level laws. Even a small change in these rules might mean you have to check and change your whole product.

What You Can Do

Keep a close eye on the rules and be ready for changes. Talk to policymakers to understand where the industry is heading. Set up a team to make sure all your products follow the rules.

You can also use special tech (RegTech) in your fintech app to keep track of and follow the rules. AI is especially good at this, especially as rules get more complex.

Finding Tech Experts

If you want to grow your fintech business, you’ll face another common problem – hiring and keeping tech experts. Building a fintech product needs people who are good at things like app development, AI, design, and data security.

To get these experts, small businesses have to compete with big companies that can pay more. Also, some skills, like deep learning, are hard to find in some countries. This means CTOs might need to look for new ways to hire people.

What You Can Do

Instead of spending time hiring, training, and managing in-house experts, fintech companies can hire outside agencies like Mindster to develop their products. This gives you quick access to a team of experts to help you grow.

Getting More Customers

Fintech companies also find it hard to get more customers. As more competitors enter the market, it’s harder to attract and convert potential customers. Things like pricing, marketing, and branding can all affect how many customers a fintech company can get.

The issues we discussed can lead to higher costs for getting new customers, making the business less profitable than expected. Without fresh customers, fintech firms risk becoming stagnant or losing ground to new rivals.

What You Can Do

Try different marketing methods to reach more people. But more importantly, make sure your product fits your target audience. Simply put, your fintech app should solve a real problem that customers want to pay for. Without this, any marketing plan you try probably won’t work well.

So, when building your fintech app, it’s crucial to ensure it meets a real market need. This concept is known as product-market fit.

On a Final Note

Fintech companies face many hurdles as they try to grow their products. These include security, legal, and tech issues that can slow growth and hurt profits if not addressed. Some fintech firms are already feeling these effects.

However, there are ways to tackle the problems in the fintech world. This article outlines practical solutions to help scale your fintech app more smoothly. Find out more about our fintech software development offerings.