With the spread of COVID-19, financial service businesses like banks are reflecting on the impact of the unprecedented global health crisis on themselves.
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 long, live stress-test environment to provide customers an 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 on both people and operational ends. While on one hand, the sector has started focusing on their manpower wellbeing, on the other hand, it has started moving towards digital transformation for operational resilience.
In our next sections, let us dig deep into why Fintech resilience is necessary and what are the different ways fintech service providers become/ continue to be resilient.
Why is Fintech Resilience Necessary?
Fulfill regulatory requirements
Because of the rising complexities of the financial systems, financial regulators have laid out the importance of nation-wide regulations. The government-level regulators evaluate the operational resilience of a fintech firm in a holistic manner led by the 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 on priority, core business elements become vulnerable to cyberattacks, pandemics, and geo-political environments. By creating resilience, fintechs get visibility of processes and crucial assets, which prepares them for instances of outages of fintech processes or services.
Now that we and the entire fintech industry have established how resilience is necessary, it is crucial to look into the challenges that stand between its complete incorporation.
Challenges Associated with Establishing Resilience in Fintech Products
An individual business service can extend across third parties and technologies. And when you add cyber crime and people in the mix, it can get difficult to collect the data points and map them against the business objectives.
Achieving this requires a defined ownership to be brought into the picture by the key cross-team business services. Each team must offer their share of inputs in the assessment along with a plan to improve their business areas.
All of this calls for a strong risk management culture in the business processes.
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 the operational resilience, the full tech stack of the 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.
How to Make a 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-personalisation 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.
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 the human limitations are no longer in equation.
Identify the critical assets
Disruption is completely unpredictable. Operational resilience is not only about business risk managementfinding and 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, policy, 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 company-wide culture of resilience and risk management in business.
As the new technology and infrastructure is adopted, the resilience plan must be tested and revisited.
Form an approach for operational risk management
A 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 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.
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
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 prevent 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, the customer expectation changes, technologies advance, and the regulations evolve.
5. Third parties. Resilience must be taken up as an ongoing check for every third-party contracts. 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.
How Appinventiv Helps in Building a Resilient Fintech Business?
We are fintech software development service providers who specialize in building resilient fintech businesses that are built to 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.
An example of this can be seen in the success of the Asian Bank app, which is a core banking solution that we created to offer functionalities such as buying and selling of cryptocurrencies and wire transactions with crypto. The result? The bank received over 50K cryptocurrency transactions and 250K+ app downloads.
We can assist you too. Get in touch with our team of Fintech experts today.