Fintech is a tidbit for a software development sector. This is a highly profitable sphere, that constantly requires innovative technical solutions. Every year financial domain evolves and adopts technologies into major processes.
The whole Fintech revolution is related to software. Thus, this dependence fueling software development to customize, integrate and arise. Our goal in this article is to define Fintech niches and figure out what role financial software plays in each field.
What Are the Top FinTech Software Development Sectors?
Sector #1. Capital Raising
Capital raising aims to provide customers with access to investments either in exchange for equity or in return of interest rates. This area can be divided into crowdfunding and alternative financing. Crowdfunding is all about helping existing companies or startups to raise capital for business porpuses. Comparing to other fintech sectors, crowdfunding is a relatively new one. It emerged in the digital era, unlike old financial spheres that originated long ago and transformed respectively. This novelty did not hurt the crowdfunding but only enriched it. Now, along with other modern spheres, crowdfunding is prospering. In general, the market equals between the range from $184M to $1.59B. And it’s just a beginning, crowdfunding is predicted to hit 1 trillion dollars in the next 10 years.
Alternative financing focuses on innovative ways of capital raising without referring to conventional finance institutions. Although alternative financing is quite modern, it’s still unfolding. Traditional foundation changes and finance takes new forms. The blockchain-based project The Acorn challenges fintech market with the new product. The Ancor is a platform, based on Ethereum, that seeks to create a global marketplace for crowdfunding. Such an approach helps to break down geographical barriers by accepting any projects worldwide.
Sector #2. Online Payments
After the rise of electronic commerce, payment systems gained its rightful place on the global Fintech agenda. It’s hard to imagine a business not using payment software. Institutions from online stores to digital banking integrate payment systems to provide seamless customer experience. Thus, the transactional value of online payment rises from year to year. In 2018, it equals $3, 265,209, showing 1,18% increase, comparing to the previous year. No surprise, that by 2020 it is expected that e-commerce sales will reach $4 trillion.
Digital revolution brings new challenges and opportunities to the payment sector. A lot of startups emerge there and strive for simplifying and improving payment processes. With such considering amount of players on this market, online payments develop rapidly.
2018 is all about blockchain, social commerce, and mobility. We’d like to cover the main trends in the sector to shed some light on where online payments are heading. First of all, e-commerce and online payments migrate to social networks. This could have been foreseen since users spend 80% of their time on social networks. AI development enables users to buy goods and perform banking operation in the middle of the Facebook conversation. Payments become more social, Finch app perfectly illustrates this trend. The app enables users to make and share payments with Facebook friends.
A second trend is a rising number of merchants accepting cryptocurrency for goods and services. It seems that blockchain came to Fintech for a long time. Actually, we already perceive blockchain as some kind of mainstream technology in the financial sphere.
Sector #3. Digital banking
Nowadays, financial institutions are refusing traditional banking models and referring to digital ones. Customers more appreciate their time and prefer managing money online over visiting a physical branch. Such customer behaviour is causing the emergence of a new generation of banks. These banks rethink the basic principles of a traditional banking system and dictate new rules. This applies to bank branches elimination, which leads to cutting maintenance costs. Cost reduction allows banks to offer more attractive rates and reinvest free assets in development. Penta is a new branchless online bank with sharp functionality and design.
According to Digital Banking Consumer Survey, today, near 46% of bank customers use only digital banking. Since banking gets more digital, great attention falls on mobile development. Online banks work on simplicity and convenience of services. Integration of chatbots, biometric identification, and other high-tech innovation are called to win the customers and offer seamless online experience.
Sector #4. P2P lending
P2P lending is leading the way and it seems this is not going to change soon. At the moment, according to analysts MorganStanley, the market of P2P-loans increases twice. Thus, we predict 2018 will be crucial for digital lending, because of few reasons.
First of all, online lending is getting smarter. Loan software enables businesses to automate crucial processes, thus saving time and resources. Secondly, online lending opens up access to new audiences. Focus changes to Millenials – the major users of mobile devices. And finally, the P2P lending software allows to improve user experience and make loans more accessible. Loan platform Kabagge is an interesting example of online lending. Kabbage offers quick small loans for businesses. Also, the company proposes personal loans on the Karrot platform.
Online lending is already reshaping the industry by making the loan-decision process faster. Automated lending software deals with loan requests and other routine tasks, creating a user-friendly customer journey. Besides, machine learning grows in popularity in the segment. It improves processes, reduces the number of mistakes and enables faster money receiving. Also, machine learning suits for the quicker defining solvency of credit applicants.
Sector #5. Enterprise financial software
This sector contains tools dealing with corporate accounts, payroll taxes and invoices. Enterprise financial software combines three areas:
- Collaboration and workflow software. Under this category falls cloud-based solutions and platforms designed to improve communication and efficiency of internal processes.
- Accounting and invoicing software. This area aims to optimize the bookkeeping time and to upgrade invoicing processes for financial institutions.
- Data and analytics software. It intends to help financial institutions to ensure security and prevent cyber attacks.
We use own internal software called Sombra Space to optimize daily processes based on our company’s needs and according to professional queries. CRM contains financial statements, operational activity, and accounting software. Another great tool we worked on is OnCFO. It is a modular platform providing financial functionality, like budgeting, forecasting, KPI tracking, dashboarding, commission management.
Sector #6. Insurtech
Insuretech is an emerging sphere, created from the blend of insurance and technology. As other financial spheres, insuretech is driven by technology. There are three main trends that currently impacting insurance. First one is Artificial intelligence and its adoption in the industry. Insurance Company Lemonade is offering homeowners and renters insurance powered by artificial intelligence and behavioural economics. The company reconsiders the main principle of insurance and make insurance interactive.
The next one is blockchain. This is a shared trend for the whole finance industry, but we notice that blockchain found better application in the insuretech then in banking. So, we finally moved to telehealth. Thus, insurance tends to shift from being remedial to being preventative. Alike other old-fashioned industries, insurance is experiencing some challenges associated with digitalization. Transformation to digital of such massive existing organization is always difficult and painful.