Data is influencing the future of fintech

Michael Hom

Head of Financial Services Solutions, InterSystems

The COVID-19 pandemic has caused significant challenges and upheaval for many industries. However, for the global fintech sector, it was the catalyst for dramatic growth.

Changes in consumer banking and spending habits, as well as increased digitalisation among more traditional financial services institutions, have driven increased demand for the products and services offered by fintechs. With that, investment in global fintech reached a record USD 98 billion in the first half of 2021, up from USD 87.1 billion in H2 2020.

Often thought to be more agile and innovative than traditional banking institutions, fintechs have reshaped how many consumers and businesses interact with financial services. In the UK, fintechs like Revolut, Starling and Monzo have become household names, with their entrance to the market influencing more digital services, encouraging a response from traditional players to even close high street branches to support this transition to online.

As more traditional banks begin to up their game when it comes to their digital offerings and competition within the fintech sector continues, to secure their future, fintechs must find ways to differentiate themselves. The key to this will be offering customers innovative applications. However, to get to this point, fintechs must firstly address two significant IT challenges.

Finding a competitive differentiator

According to research from InterSystems, a leading provider of data technology, an overwhelming 81% of fintechs say data issues are their biggest technical challenge. This is broken down into two distinct issues, with 41% of fintechs globally currently struggling to leverage data for analytics, machine learning (ML), and artificial intelligence (AI), while 40% find it challenging to connect to customers’ applications and data systems (40%). With advanced technologies, like AI and ML, and real time, bi-directional data critical to developing new and innovative applications these challenges could have serious implications for fintechs wanting to get ahead and secure a greater share of the market.

81% of fintechs say data issues are their biggest technical challenge.

Consequently, overcoming these data challenges should be high on the list of priorities for fintechs as they look ahead to the coming year. With data largely considered to be the lifeblood of any organisation, getting their data in order would allow fintechs not only to create more innovative solutions, but it would also allow them to capitalise on a variety of new initiatives, ranging from offering more personalised services tailored to individual customers to improving compliance with regulation.

Addressing data challenges

Encouragingly, investments in AI and ML, as well as data fabrics, a new architectural approach that accesses, transforms and harmonises data from multiple sources, on demand, are high on the agenda for the majority of fintechs.

InterSystems has been helping organisations both within and outside the financial services sector to address their critical data challenges for decades. InterSystems IRIS, with its advanced analytics capabilities, including embedded AI and ML, can help fintechs to resolve their data management and integration concerns. It can also undertake the data fabric initiatives needed to connect their data silos and gain a consistent, accurate, real-time view of their enterprise data assets. On top of this, it can empower fintechs to create the innovative, AI and ML-enabled applications, even if they don’t have access to data scientists that more traditional financial institutions struggle to provide.

Taking this approach and adopting next generation data platform technology will allow fintechs to connect to their customers’ wide range of applications and data systems and achieve that much-needed access to real time, bi-directional data.

In short, it will ultimately ensure fintechs are better placed to build on the momentum they have gained during the pandemic, rather than standing still. As competition within the market intensifies, this will allow fintechs to set their offering apart, continue to grow their customer base and demonstrate to both customers and banks the value of their proposition.