Fintech is a tidbit for the 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. This article aims to define Fintech niches and determine 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 for interest rates. This area can be divided into crowdfunding and alternative financing. Crowdfunding is about helping existing companies or startups raise capital for business purposes. Compared 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 the 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 financial 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 the fintech market with the new product. Ancor is a platform based on Ethereum that seeks to create a global marketplace for crowdfunding. Such an approach helps break down geographical barriers by accepting projects worldwide.
Sector #2. Online Payments
After the rise of electronic commerce, payment systems gained their 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 a seamless customer experience. Thus, the transactional value of online payments rises from year to year. In 2018, it equaled $3, 265,209, showing a 1,18% increase compared to the previous year. It is no surprise that by 2020 it is expected that e-commerce sales will be expected to reach $4 trillion.
The digital revolution brings new challenges and opportunities to the payment sector. Many startups emerge there and strive to simplify and improve payment processes. Considering the players in this market, online payments are developing 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 operations in the middle of the Facebook conversation. Payments have 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 a long time. We already perceive blockchain as some mainstream technology in the financial sphere.
Sector #3. Digital banking
Nowadays, financial institutions are refusing traditional banking models and referring to digital ones. Customers 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 branch 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, nearly 46% of bank customers use only digital banking. Since banking is getting 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 innovations is called to win customers and offer a seamless online experience.
Sector #4. P2P lending
P2P lending is leading the way, and it seems this will not change soon. At the moment, according to analyses MorganStanley, the market of P2P loans has increased twice. Thus, we predict 2018 will be crucial for digital lending for a 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 improves user experience and makes loans more accessible. The 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 has grown in popularity in the segment. It improves processes, reduces the number of mistakes, and enables faster money receiving. Also, machine learning suits 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 our own internal software 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, and commission management.
Sector #6. Insurtech
Insuretech is an emerging sphere created from the blend of insurance and technology. As with other financial spheres, insuretech is driven by technology. Three main trends currently impact insurance. The first one is Artificial intelligence and its adoption in the industry. Insurance Company Lemonade offers homeowners and renters insurance powered by artificial intelligence and behavioural economics. The company reconsiders the main principle of insurance and makes insurance interactive.
The next one is blockchain. This is a shared trend for the finance industry, but blockchain found better applications in the insuretech than in banking. So, we finally moved to telehealth. Thus, insurance tends to shift from being remedial to be preventative. Alike other old-fashioned industries, insurance is experiencing some challenges associated with digitalization. Transformation to digital of such a massive existing organization is always difficult and painful.