Fintech: Challenges for Financial Services

Statement
Fintech (financial technology) is the application of cutting-edge technology to the financial
sector. Fintech has disrupted traditional financial services by introducing innovative products and
services that are faster, more convenient, and cheaper. Fintech solutions have made financial
services more accessible to people who were previously underserved, such as unbanked or under
banked populations in developing countries. One appropriate subject according to the Fintech
challenges for financial services is the rise of digital wallets and mobile payment solutions. With
the increasing use of smartphones and mobile devices, consumers are turning to digital wallets
and mobile payment solutions to make transactions more convenient, fast and secure.

One of the areas where fintech has made a significant impact is in financial inclusion. Fintech
solutions such as mobile banking, digital wallets, and microfinance have enabled people to
access financial services who were previously excluded from the formal financial system. This
has brought financial services to remote areas, where traditional banks would not have been able
to operate profitably. One of the examples I would like to talk about in my country is the First
Iraqi Bank (FIB) the FIB mobile application to make and receive payments online and in person,
send money to your loved ones locally and internationally, and much more.

This trend is considered as one of the greatest fintech challenges for traditional financial
institutions. Digital wallets such as Apple Pay, Google Wallet, and PayPal have been gaining
popularity among consumers, who find them more convenient and easy to use than carrying
physical wallets or credit cards. Mobile payment solutions also provide a more secure way of
making transactions that can reduce the risks of fraud and theft. However, this trend also presents
challenges for traditional financial institutions, as they need to adapt to the new technology and
ensure that the security and customer service standards are at par with the ones offered by digital
wallet providers. The adoption of these new payment methods has yet to be fully integrated, with
its benefits and drawbacks still being evaluated, but companies in the financial industry are
looking to find ways to integrate these new technologies and remain competitive in the changing
landscape of financial services.
Cyber security in Fintech
Fintech has revolutionized the financial services industry by providing innovative and efficient
digital solutions to customers. However, this industry also faces numerous challenges, with cyber
security being one of the most significant concerns. Cyber security risk management is crucial in
financial institutions, as they hold sensitive information, including customers' personal and
financial data; there are some related issues we will talk about:

Increasing cyber threats: With rapid digitalization and an increase in the use of mobile or online
banking, cyber-attacks are becoming more frequent and sophisticated. The latest report from the
Anti-Phishing Working Group (APWG) reveals that phishing attacks increased by 22% in the
first quarter of 2021 compared to the last quarter of 2020 (APWGm2021).

Insufficient security measures: With the increase in cyber threats, financial institutions need to
invest in robust cyber security measures. However, smaller fintech companies often lack the
resources to implement adequate security measures, making them more vulnerable to cyber -
attacks.

Lack of awareness: Many customers are unaware of how to identify a phishing or social
engineering scam, making them more susceptible to cyber threats. Moreover, employees within
financial institutions may also lack cyber security awareness, leading to negligent behaviors that
increase the risk of a cyber-attack. This one is one of the biggest issue for the digital banking or
payment in Iraq because it is something new and people doesn’t know much about it, it has also
make people lack of confidence to use those new ways of payment this is one of the reason for
the financial services

Security breaches have the potential to cause significant financial and reputational damage to
financial institutions. Therefore, with the growing need for digital transformation, financial
institutions should prioritize the implementation of adequate cyber protection. By working
together and educating customers, employees, and stakeholders, the financial services industry
can adequately protect itself from cyber threats.
Conclusion
Indeed, fintech has revolutionized the financial services industry, making financial services
more accessible, affordable, and convenient for people around the world. The continued
evolution of fintech is likely to lead to further disruption and innovation in the financial sector. It
has also some positive and negative points:

Positive Points of Fintech: Convenience: Fintech enables customers to access financial services
from anywhere and at any time, increasing the ease of making transactions, making payments
and managing finances from their devices. Speed: Fintech companies have improved the speed at
which financial transactions can be processed. With the use of advanced technology, transactions
can be completed instantly or almost instantly, which can be very beneficial for businesses. Cost-
Effective: Fintech has the potential to reduce the cost of financial services, making them
affordable for people who could not access traditional financial services and fewer fees to be
paid. Accessible to Everyone: Traditional financial services can be complicated and out of reach
for ordinary people. But Fintech has allowed easy access to financial services making them
simple and user-friendly, making transactions and banking easier and cheaper for everyone.

The negative points of fintech are Security Concerns: Fintech involves the use of sensitive
financial data, which may be susceptible to cyber-attacks, identity theft, and fraud. The risk of
hacking, data breaches, and cyber-attacks remains a significant challenge for Fintech. Inequality:
Fintech risks widening the digital divide, making it difficult for people who do not have access to
technology or who are not tech-savvy enough to use them. This may lead to an increase in
financial inequality and exclusion for those who are unable to take part in the digital financial
world. Job loss: Fintech may lead to job loss in the banking sector as computers and algorithms
replace humans in traditional banking jobs. This may lead to a decrease in employment
opportunities for people in the traditional banking industry.
Those are the challenges and issues that make obstacle above the development of fintech so
Implementation of robust security measures: Financial institutions must develop and implement
adequate security measures, such as two-factor authentication, encryption, and regular software
updates, to safeguard against cyber threats. And Collaboration between financial institutions,
regulators, and law enforcement agencies can help improve cyber security practices in the
industry. They can share knowledge, skills, and best practices, making it more difficult for
cybercriminals to breach the system. Education and awareness: Financial institutions should
educate customers and employees on best practices to avoid cyber fraud. This includes
demonstrating how to identify phishing scams, updating software, creating strong passwords, and
regular data backup.

In conclusion, Fintech has succeeded in making financial services more convenient, accessible,
and cost-effective. Ultimately, the success of fintech will depend on how well it balances
innovation with security and regulatory compliance. If done successfully, fintech has the
potential to improve financial services for millions of people around the world. However, it
brings its own set of challenges and risks. It is important to approach the advancements in
Fintech with caution, in order to address the negative points and realize the full potential of
Fintech.
Reference :
1. https://docs.apwg.org/reports/apwg_trends_report_q1_2021.pdf?_ga=2.16125174.156631
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