Fintech challenges in 2024 and beyond – thoughts after the Fintech conference

Fintech predictions

Last week, I had the extraordinary pleasure of participating in Stockholm Fintech Week 2024. The entirety of this beautiful event would deserve a separate article. Still, this one will focus on the conference’s core – the fintech industry’s challenges.

In Stockholm, I talked to many decision-makers in this industry about the challenges and problems they face and what they expect the future to bring. Therefore, based on these conversations and on Scalac’s extensive knowledge (we have been working with fintech for ten years), this article is intended to consider the path ahead for the entire fintech industry in rapid technology development.

Fintech challenges 2024

As one may point out, the fintech industry is another fresh fusion of the finance and technology forces, indicating to have experienced a rollercoaster of innovation and constant growth for the last couple of years. In this vein, the following 2024 paper highlights recognized challenges in such a dynamic industry and the implications that would have on its past trajectory—short or long-term.

From the ever-menacing prospect of cybersecurity threats and a simultaneously thrilling and scary frontier that AI embodies to sustainable growth concerns and an intricate architecture dance—the road is paved with stumbling blocks. But within those challenges lie enormous opportunities for whoever is ready to tackle them head-on. So, take your favorite refreshment, and let’s dive into what 2024 offers for the fintech industry.

Cybersecurity challenges for fintech: A Perennial Battle

It’s obvious, but let’s repeat it: data is the new gold in the digital age, so cybersecurity is the fortress every fintech company must build and bolt. The rise of digital financial services opens up new rewards to cybercriminals that grow exponentially, especially with the cult status of the fintech sector. Combine issues such as phishing, ransomware, and advanced persistent threats (APTs). And so on. And this is only the tip of the iceberg. Their sophistication is over the roof, and even the sturdiest security measures become vulnerable because of them.

The challenge is not merely averting breaches (an almost Sisyphean task) but how nimble and comprehensive a fintech can be in response and recovery. It is about resilience. Consider a case where a data breach exposes sensitive customer information. The impact of that attack is not just financial; it might be coupled with the loss of reputation to a far more fatal stage, beyond repair.

Add to that regulatory environments getting stricter—from all these standards, which add another layer of complexity to the cybersecurity challenge from a fintech perspective many firms must navigate.

Read more about the cybersecurity approach here: https://scalac.io/blog/cybersecurity-blueprint-for-software-houses/

To sum up, most of the cybersecurity problems we discussed at the Stockholm Fintech Week were:

• Advanced Persistent Threats – advanced fraud techniques often use complex – long-term strategies to get inside the system and, from there, blind cybersecurity solutions. That way, fraudsters can evade detection while operating inside the system.
• Social Engineering Attacks – phishing and social engineering attacks are still some of the most dangerous ways fraudsters use to compromise cybersecurity defense. The human factor is a system’s weakness, and it is challenging to counteract such actions with a strong awareness of all process participants.
• Unencrypted data – although all sensitive data should be encrypted, there are moments when data remains sensitive – its interception at such moments, even if it is minutes, can result in a data breach with disastrous consequences.
• Ransomware attacks are one of the most feared forms of cybersecurity breach that can paralyze the functioning of the whole institution. It could, in worst cases, paralyze the entire process, leaving clients without access to services and, at the same time, force the company to pay a ransom for restoring operations.
• Supply chain breach – the constant digitization of business means that even a secured system may be vulnerable to attack by allowing third-party services into the process.

Going deeper into this topic will require an additional article, but cybersecurity is one of the most critical challenges in the fintech industry. Deficiencies in cybersecurity may cause loss of funds or trust in the eyes of customers and cause the project’s collapse. Therefore, the security architecture must be approached with particular care.

AI Challenges: The Double-Edged Sword

Artificial intelligence focuses on providing expanded customer service regarding personalized financial services and options, fraud detection, and operational efficiency. However, the disadvantages are equivalent to the benefits so that it can be a double-edged sword.

The major one rests within the arena of the ethics of using AI. When algorithms become a part of the fabric of financial decision-making, it brings issues such as bias in credit-granting or investment advisory services to the fore. Striving to guarantee that AI systems have fairness, transparency, and accountability seems no small effort—especially when the operation of the former might as well be as opaque as a moonless night.

The information AI systems need for learning and improvement could be a minefield for privacy. A successful stride between the need for comprehensive data and the requirement for consent from and its protection of users is a tightrope that fintech firms have to master. They need more resources or in-house talent to justify or support full-scale research and product development. Let alone the talent gap: the demand for knowledge of AI so exceeds supply that it becomes tough for companies to recruit and retain enough support to move AI initiatives ahead.

Sustainable Growth Challenges: The Green Elephant in the Room

As the awareness of these issues accelerated through the last few decades, so did the table stakes levied on companies on their responsibility. Fintech is no exception. What sustainable growth is likely to look like for a fintech is straining to reduce its carbon footprints, going for green cloud computing initiatives, or even offering products to promote the practices for sustainable investment.

However, it is plagued with several grave challenges. The reasons to scale fast and get quick returns for most investments often clash with a long-term view necessary for sustainability in business. Fintech companies often find themselves in this precarious tightrope position, striving to be profitable on one arm and ensuring environmental sustainability. A tall order makes a fintech firm shine in an otherwise crowded market space.

System Architecture Challenges: Building for Today and Tomorrow

The more fintech firms grow, the higher the complexity levels involved in their system architectures will become. The question is posed in building robust, secure, scalable, and flexible systems. Legacy systems, most notably those used as the backbone of traditional financial institutions, have remained inflexible. Migrating from such systems without service disintegration is a Herculean effort.

This tech likely represents greater connectedness, as APIs could interconnect services from payments to personal finance management. However, interconnectivity, though an excellent value for innovation and customer experience, encompasses all integration, security, and reliability challenges.

Now, the cloud computing and microservices architecture, which had yet to be created, has finally provided a plausible way out by ensuring all the much-needed scalability and flexibility that fintech firms require. However, the transition comes with challenges—from ensuring data security in the cloud to managing the intricacies introduced by distributed systems.

Final thoughts

Stockholm Fintech Week gave me great insight into where the fintech industry is heading in the coming years, as well as the most critical issues that will bother it: cybersecurity, challenges related to AI development, scalable infrastructure (this is often a big problem). I will touch on these issues in subsequent articles, but it gives me some insight into what we will face in the coming years. However, all these issues focus on a fundamental problem – the need for experts to build durable, secure, and scalable solutions that keep up with rapidly changing conditions. What worked a few years ago may be completely useless now.

Therefore, opening up to new opportunities must be supported by extensive knowledge and experience that can function and be competitive in a rapidly changing reality.