How to Bring Resiliency in Financial Services Business?

Sudeep Srivastava January 6, 2023
financial services business

With the spread of COVID-19 in the year 2019, fintech organizations have faced the impact of the unprecedented global health crisis that has led to critical changes in financial operations. 

Right from moving employees to remote working, to addressing the elevated demand on technology systems in such extreme untested circumstances, banks are living through a stressful environment to provide customers easy access to products and services.

In the pandemic era, resilience has become one of the defining characteristics of the financial domain. It has come to the forefront of both people and operational ends. While on one hand, the sector has started focusing on its manpower well-being, on the other hand, it has started moving towards digital transformation for operational resilience.

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In our next sections, let us dig deep into why fintech resilience is necessary and what are the different ways fintech service providers become or continue to be resilient. 

Why is Fintech Resilience Necessary? 

Fintech institutes like banks now prioritize operational efficiency, which they see as being crucial to financial resilience. The individual goals of the regulatory agencies as well as their joint mission of preserving financial stability are both threatened by a lack of resilience. Let’s check out the reason behind the necessity of fintech resilience. 

Fulfill Regulatory Requirements

Because of the rising complexities of the financial systems, financial regulators have laid out the importance of nationwide regulations. The government-level regulators evaluate the operational resilience of a fintech firm in a holistic manner led by technological and market changes.

Prepare for Security Threats

With growing dependence on third-party service providers and digital tools, fintech business exposure to security attacks has increased the need for the sector to prepare for security issues. Compared to other types of risks, cyberattacks are a lot more difficult to find and eliminate until a resilience engineering system is created.

Eliminate the Risks of Outages

When resilience is not kept as a priority, core business elements become vulnerable to cyberattacks, pandemics, and geo-political environments. By creating resilience, fintech gets visibility of processes and crucial assets, which prepares them for instances of outages of fintech processes or services.

Fintech Business Resilient

Build Resilience and Customer Engagement with Data

During the ongoing pandemic situation, a couple of months back, the data-driven organizations proved themselves to be more resilient and confident. For navigating into the next phase of uncertain events, it made sense for such organizations to rely on their data. Real-time analytics and insights play a crucial role in empowering the team, and helping them to make informed decisions. 

Businesses can now make accurate predictions and rightly know where they are heading. By building resilience, they can also identify various opportunities that can increase their productivity and fine-tune their operations. 

Also, with resilient control systems, organizations can integrate data at every step to boost their customer experience and create real-time customer profiles. These user profiles will enable the teams, including service, sales, marketing, and others, to ensure a tailor-made experience for the users in real-time.

Balance Corporate Responsibility and Profitability

The need for driving sustainable growth has made fintech businesses rely on resilience engineering that could support business models for balancing both profitability and corporate responsibility. The resilient control systems have helped fintech organizations to achieve greater stakeholder satisfaction and engagement. 

The top global brands believe that technology and data can support resiliency and inclusive business models that mainly serve the requirements of the financial services industries. For instance, at the height of the pandemic, many customers faced problems with cash flow. But there were several financial institutions that leveraged data for increasing flexibility in their business operations by restructuring their loan program. 

In this way, customers would easily carry out their financial transactions and also receive support from financial institutions regarding loan repayment needs.

Now that we have understood how resilience is necessary for the fintech industry, it is crucial to look into the challenges that stand between its complete incorporation. 

Challenges Associated with Establishing Resilience in Fintech Business

Let’s have a look at some prevalent challenges associated with establishing resilience in fintech businesses:

Cultural Challenges 

An individual business service can extend across third parties and technologies. And when you add cybercrime and people into the mix, it can get difficult to collect the data points and map them against the business objectives. 

Achieving this requires defined ownership to be brought into the picture by the key cross-team business services. Each team must offer its share of input in the assessment along with a plan to improve its business areas. 

All of this calls for a strong culture of risk management in business processes.

Investment 

Depending on the age of the fintech business, investments in resilience can be very high. Money will have to be allocated behind – 

  • Regularly assessing the operational risks that they face with regulatory developments
  • Analyzing the potential vulnerabilities
  • Implementing the right defense mechanisms

Complexity of Legacy Systems

The legacy systems of financial institutions can get very complex and difficult to manage and upgrade. To improve operational resilience, the full tech stack of legacy systems must be upgraded and assessed for maintaining resilience capabilities.

Noting why risk management is important for businesses and the challenges associated with it, it is important to understand how to build fintech software resilience with perfection.

Bonus Read- 6 Key Strategies to Boost IT Resiliency

How to Make a Fintech Business Resilient?

How to Make a Fintech Business Resilient?

This uncertainty and market volatility are caused by a variety of variables, including supply and demand shocks, stern anti-inflation policies, and a lack of finance for new projects. When it comes to technology, these have an effect on the flow of capital and affect investment behaviors. Let’s check out some of the top ways of making your fintech business resilient. 

Emphasize on Customers

Fintech service providers that aim to better their customer-driven approach are going to be equipped to manage any shocks in the systems.

The pandemic has elevated customer-centricity to an extent that experts are now betting on the future of financial services with hyper-personalization in the picture. The fact of today is that the companies which put customers first will flourish. 

Cyber Security Should be the Main Focus

Financial frauds and risks have been increasing because of the sudden move towards digitalization. At the present rate, by 2024 the rate of payment fraud is going to increase by around 130%. 

This concern is faced and raised on a country level. For example, the United Kingdom has tagged the growth of cyber-attacks as a “national security threat”. For bolstering cyber-resilience, fintech businesses will have to incorporate artificial intelligence or other cutting-edge solutions.

Appinventiv experts worked with a leading fintech enterprise, Bajaj Finserv, and leveraged their cybersecurity intelligence services for building a digital platform that utilizes advanced technologies for preventing fraudulent activities.

RPA-Enhanced Productivity

Noting the rise in mass personalization and fraud attempts, prioritizing productivity around these variables can allow fintech companies to gain an advantage over their competitive sector. 

Through robotic process automation, fintech brands are using software to imitate human workers to perform low-skill and routine tasks. Additionally, automating menial work produces constant output at a faster pace, as human limitations are no longer in the equation.

Recognize and Control your Cash Flow

By comparing the sum of your unpaid purchases to the total sales due at the end of each month, a straightforward cash flow analysis will help you locate the bottlenecks. 

You should recognize where you might need to cut expenditure, where you’ll need to step up your sales efforts, or which of your clients are sluggish payers if the number of outstanding purchases exceeds the total of the sales that are still owed.

Plan your Investments and Financing 

Maintaining your budget can let you utilize the business decisions that will keep you adaptable. Additionally, it can assist you in identifying prospective financing shortfalls and solutions to close them beforehand. 

Many SMEs assume they won’t be able to access financing, however, recent research shows that 88% of companies that apply for expansion finance are approved.

Find Fresh Revenue Opportunities

Companies that are financially stable search for ways to keep costs minimal while simultaneously exploring new revenue streams. Making a new revenue stream must be approached intelligently in order to be lucrative, as with other company decisions.

By leveraging a company’s resources and increasing the lifetime value of a customer, diversification drives growth while also assisting organizations in absorbing unanticipated market shocks.

However, in order to be successful, organizations must be proactive about reducing the risks associated with diversity. You should choose a good or service you can sell with low marginal costs after assessing your current business resources and market demands.

Identifying the Critical Assets

Disruption is completely unpredictable. Operational resilience is not only about business risk management or finding risk management strategies for measuring the risks, as the evolving technologies and changes in the market cannot be predicted. It should be the framework for saving the key businesses. 

Finding critical assets and core business tasks should be tackled with a clear intention of protecting the operations and assets irrespective of the disruption source. An operationally resilient fintech firm will have procedures, policies, and practices in place to help them through every disruption.

Proactively Audit the Plans

Resilient control systems is a dynamic process that requires frequent reviews, tests, and audits. As the processes and systems evolve, so should the resilience plans. 

Constantly employing external and internal audits helps assess the effectiveness of the resilience efforts, which helps keep the plan relevant, find shortcomings because of policy and process changes, and support a company-wide culture of resilience and risk management in business. As new technologies and infrastructure are adopted, the resilience plan must be tested and revisited. 

Form an Approach for Operational Risk Management

Resilience engineering software is needed for establishing and managing the exposure specific to the people, internal processes as well as third parties and external threats. But, this cannot be done in a silo. An effective operational and business risk management system calls for a collaborative mode between the business units, senior management, and the external or internal audit function. 

A cross-functional model leads to strategic identification, mitigation, and solution of the operational risk, including third-party risk.

Now let’s move on to discuss how and when to address operational resilience.

Bajaj finserv fintech app

How and When to Address Operational Resilience?

Operational resilience should not be seen as a one-time event but rather as a core set of values and behaviors ingrained in the fintech firm’s culture and DNA. Financial institutions should conduct continual evaluations and constantly adapt to counter new threats and implement new solutions since operational resilience is connected to change.

Financial services organizations should periodically assess the most effective ways to devote time and resources to improvement while looking at the typical causes of operational interruption. Businesses can analyze their capabilities to recognize, prevent, detect, respond to, and recover from cyber disasters using a range of business risk management tools. Technical teams and business stakeholders can communicate more easily with the help of this kind of framework.

Building an organizational understanding of cybersecurity risk management across systems, people, assets, data, and capabilities is beneficial. It applies equally to both pure cyber-resilience and operational resilience.

Here are a few steps that can streamline your operational resilience journey:

  • Consider the organizational standpoint:  Make sure that the team has enough operational resilience knowledge. Senior management should implement suitable KPIs for execution and control and show measurable progress.
  • Ensure a shared culture: To build better practices across the domains of people, process, governance, and technology, use a multidimensional operational resilience framework as a guide.
  • Look for an objective, external market perspective: Look for alternate, impartial opinions from related organizations and nearby industries to supplement your in-house knowledge.

While these pointers play a key role as the factors to consider when we talk about making fintech solutions resilient, it is important to have a process in place as well.

Process for Making Resilient Fintech Products

Process for Making Resilient Fintech Products

Maintaining and continuously improving fintech resilience is the need of the hour for the industry to establish trust with the customers and the regulators. Ensuring this requires them to follow a set framework of processes. 

1. Reporting

Efficient reporting of the KRIs and KPIs is the key to taking strategized resilience decisions.

2. Testing

Frequent audits and testing should be performed to assess and reassess the business’s resilience capabilities. 

3. Technology

The technology stack must be kept up to update to protect the fintech products against any cyber threats or lags arising because of out-of-support technology. 

4. Tolerance

The impact tolerances should be reviewed consistently as the business strategies modify, customer expectation changes, technologies advance, and regulations evolve. 

5. Third Parties

Resilience must be taken up as an ongoing check for every third-party contract. Ensuring resilience goes further than checking the internal organizations and extends across every party that the business interacts with. 

6. Change Programs

The resilience criteria should be checked before the IT or business process programs are changed and are allowed to proceed. 

7. Communication

Efficient external and internal communication lines should be maintained. The intent at every stage of resilience must be to lower any resilience-specific backlog over time. 

8. Disaster Recovery

Disaster recovery plans should not just cover the impact of disruption but also the solution. There should be a dedicated crisis management team to solve the issues. 

9. Cultural Change

Once you have the operational resilience part handled, it’s time to move to the cultural part. A cultural change is necessary for employees to understand the resilience framework, the role they play in it, and the importance of business continuity.

10.  Ownership

A well-defined ownership of the key roles and tasks in the operational resilience framework is needed so that the process runs smoothly and clear responsibilities are assigned.

Also Read: How to choose the right financial software development company?

How Appinventiv Helps in Building a Resilient Fintech Business? 

We are fintech software development service providers who specialize in building resilient fintech businesses that can mitigate every risk – both internal and external. 

We understand what it takes to make a fintech firm digitally ready to serve the needs of an unpredictable world. In the pandemic era, we have helped a range of fintech businesses across the globe survive with the incorporation of next-gen technologies like Blockchain, AI, and IoT

We can assist you too in streamlining your financial services business. Get in touch with our team of Fintech experts today.

FAQs

Q. What is resilience in fintech business?

A. Resilience has historically focused on ensuring business continuity following a cyber-breach or service interruption brought on by an IT outage for financial services companies. However, after the pandemic, this definition has changed.

Q. How do you build resilience in your fintech business?

A. Here are some of the ways through which fintech organizations can build financial resilience in their business:

1. Greater Control over Security

Cybersecurity has grown in importance as the finance sector digitizes more and more. Operators in the fintech industry struggle to manage sensitive and private data.

Therefore, fintech companies need strong security, which can only be accomplished through software development, in order to offer a secure protocol. You can effortlessly manage your company’s security level and shield it from threats with a custom app.

2. Securing Transactions

Financial fraud, security lapses, and identity checks are all increasing at an alarming rate. Fintech firms are currently making investments in cutting-edge technology-driven security enhancement methods to enable secure, end-to-end payment encryption, authentication, and verification.

3. Brings About a Personalized Experience

In order to minimize the risk of becoming obsolete, banks and other financial institutions are now implementing speedier digital transformation strategies. As a result, financial institutions are currently updating or renewing their current systems by creating brand-new platforms that encourage innovation.

4. Implement Advanced Technologies

In order to maintain a smooth financial process, these banking institutions are now implementing cutting-edge technologies like blockchain, AI, ML, and IoT. By building sophisticated dashboards, personalized portals, automated workflows, CRM software, and AI-powered chatbots, a custom software solution can provide a customer experience that is specifically tailored to their needs. This can help financial institutions and banks improve the operational efficiency of their businesses.

5. Improve the Retention of Customers

Since the advent of on-demand, people expect everything at their fingertips. They are more educated and tech-savvy. They anticipate more streamlined and customized banking options from your end.

You may give them a meaningful encounter with custom software solutions by utilizing cutting-edge robotics, blockchain, AI, and analytics technology. You can do this to enhance your banking services and fulfill customer expectations.

Q. Why is investing in fintech software development a lucrative option?

A. For many reasons, investing in the development of custom financial software is a wise course of action for business owners. Let’s make a list of them.

  1. Money is becoming digital
  2. The enormous app space
  3. Less people are visiting banks
  4. More innovative possibilities

Q. What is risk management in business?

A. The process of identifying, evaluating, and controlling risks to your company’s financial stability is referred to as risk management. 

The fundamental notion behind that description is that a business will think through all the potential problem areas, think through the best solutions for a challenging circumstance, and then put controls in place to assist keep that risk as low as possible. 

It also entails resolving a challenging circumstance when it occurs. Risk management in a business is essential to ensuring that a business and its leadership are aware of potential issues, assisting them in coming up with solutions, and reducing their risk.

THE AUTHOR
Sudeep Srivastava
Co-Founder and Director
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