With the spread of COVID-19, FinTech organizations have dealt with the impact of the unprecedented global health crisis that has led to critical changes in financial operations.
From transitioning employees to work remotely to managing increased demands on technology systems in such extreme, untested conditions, banks must navigate a stressful environment to provide customers with easy access to products and services.
In recent times, resilience has become one of the defining characteristics of finance. It has come to the forefront of both people and operations. While focusing on the well-being of its employees, on the one hand, the finance sector has also started to focus on digital transformation to improve its operational resilience.
Why FinTech resilience is necessary
Fintech institutions are now prioritizing operational efficiency, which they see as critical to financial resilience. A lack of resilience threatened regulators’ individual goals and a shared mission to maintain financial stability.
Here are the reasons why fintech resilience is needed:
Meeting Regulatory Requirements
Due to the increasing complexity of financial systems, financial regulators have outlined the importance of regulations. State regulators assess a fintech company’s operational resilience in a holistic manner, taking into account technological and market changes.
Prepare for security threats
Fintech companies are increasingly exposed to security attacks due to their growing reliance on third-party vendors and digital tools, so the sector needs to prepare for security issues. Compared to other types of risks, cyberattacks are much more difficult to detect and remediate until a system is in place to improve resilience.
Eliminate the risk of outages
When resilience is not prioritized, key business elements become vulnerable to cyberattacks, pandemics, and geopolitical circumstances. By creating stability, fintech organizations gain visibility into processes and critical assets, preparing them for fintech process or service failures.
Building resilience and customer loyalty with data
During the current pandemic a few months ago, data-driven companies proved more resilient and confident. To navigate the next phase of uncertain events, it made sense for such companies to rely on their data. Real-time analytics and insights are critical in empowering the team and helping them make informed decisions. Companies can now make accurate predictions and rightly know where they are headed. By building resilience, they can also identify different ways to increase productivity and fine-tune their operations.
With resilient control systems, companies can integrate data at every step to improve the customer experience and create real-time customer profiles. These user profiles enable teams, including service, sales, marketing, and others, to ensure a tailored experience for users in real time.
Balancing corporate responsibility and profitability
The need to achieve sustainable growth has led fintech companies to rely on resilience engineering to support business models that can balance profitability with corporate responsibility. Robust control systems have helped fintech organizations increase stakeholder satisfaction and engagement. Top global brands believe that technology and data can support resilience and inclusive business models that meet the needs of the financial services industry in particular.
For example, many customers were experiencing cash flow issues at the height of the pandemic. However, several financial institutions used data to make their business operations more flexible by restructuring their loan program. In this way, customers were able to process their financial transactions smoothly and also received assistance from financial institutions in repaying loans.
How to make a fintech company resilient
Various variables, including supply and demand shocks, strict anti-inflation policies, and a lack of funding for new projects, cause this uncertainty and market volatility. In the technology sector, these factors affect the flow of capital and influence investment behavior.
Here are some of the best ways to make a fintech company resilient.
Put the customer at the center
Fintech service providers looking to improve their customer-centric approach will be able to handle any shakeups in systems. The pandemic has pushed customer centricity so far that experts are betting on the future of financial services with hyper-personalization. The fact is that companies that put the customer first will thrive.
Cybersecurity should be the main focus
Financial fraud and risks have increased due to the sudden move toward digitalization. By 2024, the number of payment fraud cases will increase by about 130%. This concern is expressed at the country level. The United Kingdom, for example, has classified the increase in cyberattacks as a “national security threat.” To strengthen cyber resilience, fintech companies need to deploy artificial intelligence or other innovative solutions.
With the rise of mass personalization and fraud attempts, prioritizing productivity related to these variables can give fintech companies an edge over competitors. By automating processes with robots, fintech companies use software to mimic human workers performing low-skill and routine tasks. In addition, automating menial tasks results in consistent output at a faster pace because human constraints are no longer in the equation.
Identify critical assets
The outage was completely unexpected. Operational resilience is not limited to managing business risks or finding a risk management strategy to measure risk, as technological and market changes are unpredictable. The base business should be the foundation for savings. Identifying critical assets and key business issues must be approached with the clear goal of protecting operations and assets regardless of the source of disruption. A resilient fintech company will have procedures, policies, and practices in place to help deal with any disruption.
Develop an approach to operational risk management
Resilience engineering software is essential for creating and managing risks to people, internal processes, third parties, and external threats. However, this cannot be done in silos. An effective operational and business risk management system requires collaboration between business units, senior management, and external or internal audit functions.
The conflict model guides the strategic identification, mitigation, and resolution of operational risks, including third-party risks. The main idea behind this statement is that organizations consider all possible scenarios, consider the best solutions to difficult situations, and establish controls to minimize these risks. This includes dealing with difficult situations when they occur. Enterprise risk management is important to ensure that the company and management are aware of potential problems to find solutions and mitigate risks.