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Digital finance or fintech is a word to describe technological evolutions that are happening in the financial sector to deliver products and services. With an opportunity for individuals and businesses to use the technology, there are certain challenges, like the need for blockchain development services that come along. You can manage your finances and conduct transactions safely and securely but still find some difficulties, challenges, or issues.
By identifying them, it will be easy to solve them and associate them with the development of the digital financial market.
This blog will delve into these key challenges for optimally utilizing the fintech industry.
Overview of the major digital financial challenges
To identify the challenges associated with any field of digital finance, the foremost thing to do is to find out the common reasons suppressing the growth of DFS (Digital financial services) in developing countries.
Although some Bitcoin payment processors like Speed are providing solutions to overcome these potential drawbacks; however, it will be practical to keep these challenges in consideration.
As per the research, these challenges are authenticated based on the literature reviews.
Sr. No. |
Key Challenges |
Brief overview |
1 |
Risk of using digital finance |
There are security risks in digital finance as banks can stop clients from using digital financial services. |
2 |
Issues of reliability |
Security gaps get reduced in the financial market; hence, it is hard to rely on protection against fraud. |
3 |
Privacy concerns |
Everything being on the internet, there are chances of getting hacked over the confidential information. |
4 |
Authentication process |
Poor authentication services on multiple digital assets. |
5 |
Lack of digital literacy |
Consumers are not fully aware of digital currencies and services; hence, they get discouraged from using them. |
6 |
Negligence towards the advantages of the digital finance market |
There is limited awareness about the benefits that come along with the digital finance market. |
7 |
Tech and networking issues |
Consumers' trust in digital finance will descend by facing critical issues such as digital disruptions. |
8 |
Lack of professional agents in the market |
Many services are run by agents in the digital finance market; hence, it became a challenge to find professional agents for guidance throughout. |
9 |
Regulatory hindrance |
Lack of regulatory framework increases the digital risk, discouraging consumers from using them. |
10 |
Minimum adaptability of new technology |
Digital services most negatively influence the Banking industry with a lack of adaptability to new technology. |
11 |
High initial cost and low return related problem |
In the digital financial market, the returns are not as great as the initial investments. There are limited rolling out in the DFS. |
12 |
Unavailability of Internet worldwide |
Significant use of digital finance is not possible as there are a lot of areas in the world where the Internet is not accessible. |
13 |
Lack of mass consumers |
People will not have access to the market of digital finance if their community doesn't have mass consumers and adopters of the same. |
14 |
Lack of trust |
Consumers are not yet satisfied with the reliability of digital currency, and hence, they have not built trust. |
15 |
Limited wider integration and interoperability |
Interoperability of banks and digital currency in both urban and rural regions are limited when it comes to integration. |
16 |
Dormancy problems |
There are chances of people generating access to digital accounts and then leaving them without any service, and they get dormant. |
17 |
Limitations in low-value transactions |
Some wallets and exchanges do not allow a minimum value transaction, which reduces the effectiveness of the service. |
18 |
Gender disparities in the ownership of financial services |
With the reduced access of women in the financial market worldwide, ownership of digital finance faces gender disparities. |
Key market challenges associated with digital finance
Addressing numerous challenges in the digital finance market is the key to utilizing the technology to its full potential.
Let's find out about them below:
Inclusion and Accessibility
One of the leading issues in the digital finance market is inclusion and accessibility. Many such people worldwide do not have access to these services, and the reasons are limited financial literacy and access to technology. Such exclusion creates instability in coping with this issue; financial inclusion is required.
Bitcoin is a better solution for that as there are no boundaries in its accessibility; with an advanced wallet like Speed Wallet, one can access digital money from anywhere and spend it on any product or service. This leads to a more financially educated society and will also promote the growth of digital finance.
Technology
Another challenge of digital finance is the technology; the systems integrated with new tech are costly and consume learning time. Along with this are infrastructure costs, innovation costs, and maintenance charges. These charges can be avoided by accepting digital currencies such as Bitcoin.
Countries promoting the digital finance market should embrace open banking and invest in infrastructure to overcome the challenges and promote growth to investors and digital market enthusiasts.
Consumers will adopt
In any physical or digital market, consumer adoption is a vital challenge. Many consumers need to be more resistant to change and have trust issues with new technologies. They need to be aware of tech use and find it difficult to include it in their financial system.
To address these challenges, financial institutions and tech providers must improve the customer experience, mitigate their trust issues, and educate consumers regarding the benefits they will have. This will make the consumers more reliable toward giving it a try.
Partnership
For the growth of the digital finance market, collaboration is required. Without the partnership, there will be stagnant growth, and people will find it difficult to access them conveniently. These challenges can be addressed by collaborating with technology partners, financial institutions, and regulatory agencies.
Working together with these partners promotes innovation and makes it easy to access all digital financial services. Operating as a combined entity, all the facilities can be accessed simultaneously, simplifying the overall experience of using any DFS.
Protection against fraud
Fraud is a significant issue in finance. There are risks like cyber-attacks, identity theft, and fraudulent activities. This affects the online transfer rates, and people prefer the safety of their funds over the ease of transactions.
To deal with this drawback, financial institutions, and tech providers need to implement robust methods of cybersecurity that protect against these threats effectively. Additionally, implementing identity verification processes is also a great alternative to prevent identity theft and fraud-associated activities.
Regulatory measures
Regulations play an essential role in the performance of every entity. Similarly, regulatory compliance is a challenge for the market of digital finance. The rules are complicated and need to be followed to avoid money laundering and get the customer's identity. In DFS, technology and computer analysis help you to watch for any suspicious activity in transactions.
However, if the regulatory environment is simplified by fostering collaboration between regulators and industry players, it will be more efficient to consider the digital finance market as a reliable way to manage your money.
Conclusion
After the pandemic, there have been a lot of trends in the financial sector, like people moving to digital channels and rising expectations of customers with the efficiency of transactions. With the increased competition, various channels adopt experimentations and personalization to deal with the market challenges and deliver the unique individual experience consumers demand.
Analyzing and going through these critical challenges will make it easy to bifurcate between which services are better to take risks for and which digital channel is more volatile. The above-mentioned curated challenges simplify your journey towards the digital finance market.
