Challenges and Opportunities in Mobile Banking App Development

FinTech history was created by the Royal Bank of Scotland in 2011. 

That was the year they released the first mobile banking app in history to work flawlessly. This app, developed by the Royal Bank of Scotland, revolutionized the way people interacted with their banks, setting a new standard for mobile banking apps. 

The market for banking applications has expanded significantly since then. These days, almost all of the world's leading banks have their own apps. There are also 'neobanks ', a term used to describe digital-only banks that provide banking services exclusively via an app, without any physical branches. 

Additionally, it is projected that over 60% of Americans will utilize digital banking, a term that encompasses various online and mobile banking services, in 2021. Although there are many prospects in the mobile banking space, there is also increased competition in this field. 

To flourish, newcomers to the sector must overcome several technological and commercial obstacles. Below is a list of a few of them. 

Difficulties and Opportunities in Mobile Banking App Development

The process of developing a mobile banking app is difficult and full of obstacles. However, it also presents a unique opportunity for developers and financial organizations to make a significant impact. Developing mobile banking apps requires a thorough knowledge of the banking sector and financial organizations' requirements. This is due to the need that mobile banking applications have a smooth user experience and be able to interface with current banking systems. By overcoming these challenges, developers can provide dependable, safe, and easy-to-use mobile banking applications that aid financial organizations in drawing in and keeping customers. 

Meeting Security Standards

One of the biggest obstacles to creating a banking app is security, given the growing dangers associated with cybersecurity breaches. 

Numerous data support this assertion. The most terrifying thing, however, is undoubtedly this: the number of public data breaches in 2021 has already surpassed that of 2020. It is also more than 200 instances short of the all-time high. 

However, according to Eva Velasquez, CEO of Identity Theft Resource Center (ITRC), the figures should be different from what bothers you. According to her:

"The number is not the takeaway for me. Their targeting is starting to become more methodical," warns Eva Velasquez, CEO of identity Theft Resource Center (ITRC). She points out that hackers are now focusing on specific vulnerabilities and using more sophisticated methods, such as social engineering, to gain unauthorized access to sensitive data.

Additionally, banking applications are a very lucrative target for hackers since they hold sensitive financial data from thousands of customers. 

However, protecting your app is becoming increasingly difficult due to the diverse threat environment that hackers provide. If you want to survive, you must use a multi-layered security strategy to address all of your weaknesses. 

Although each precaution is crucial, permission and authentication provide the most basic security. This is due to the fact that phishing and other social engineering attacks are among the most frequent ones you'll run against. 

Unfortunately, solid passwords are readily cracked, so they don't provide adequate security.

Using several authentication mechanisms, such as two-factor authentication (2FA), a security process that requires users to provide two different types of identification, is a preferable strategy. 

Beyond this, you should be mindful of your coding standards and application logic to ensure they do not introduce vulnerabilities into your system that hackers may exploit.

Remember to safeguard your app's environment as well. Using technologies like distributed denial of service (DDoS) mitigation, anti-malware, and next-generation firewalls, you can fortify the security layers protecting your webserver, network, and API connections. 

Last but not least, app testing is highly important. Critical problems and vulnerabilities may put a financial app at risk more than any other aspect. Eliminating them at the earliest opportunity ensures a far safer app overall. 

Protecting User Data

Safeguarding your users' financial information is only an addition to the cybersecurity measures we already covered. But it's so important that it merits its section. 

As previously said, there have been incredible data breaches over the last several years. However, the harm caused by these assaults is still unresolved. 

According to a Varonis analysis, financial institutions exposed 352,711 sensitive information on average for every cyberattack incidence. According to RiskBased Security, 36 billion data were compromised in only the first half of 2020. 

Data privacy is so important that laws are in place to ensure financial institutions take the necessary precautions to secure it. 

For example, financial firms that cater to European consumers are subject to the stringent General Data Protection Regulation (GDPR) or risk incurring heavy penalties. 

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According to a 2018 German survey, data protection is more important than compliance to maintain consumer confidence. 

Data privacy is the biggest worry for users of fintech applications, according to another poll, with 99% of users expressing some degree of anxiety about it:

It's not that app developers don't understand the need for data privacy, however.

The primary obstacle is that banking applications are part of an ecosystem. Applications must handle financial data and establish connections with other financial entities. Regretfully, this gives hackers plenty of chances to intercept and use this data. 

Encrypting that data is one of the best methods to stop this from occurring. 

Although this doesn't stop a hacker from obtaining the data, it does render it useless. All they would perceive without the key is nonsense:

Encryption must be performed both in transit and during storage for it to be effective. PGP and AES are two well-liked encryption methods. 

Limiting the amount of data that is saved in the user's app is another essential practice with banking applications, in addition to encryption. 

In other words, each piece of information you save locally should have a solid purpose. In this manner, in the event that the app is hacked, you reduce the exposure of data. 

It is advisable to include payment blocking as an additional security measure to prevent unapproved access to data. This enables the system to halt any transaction that is considered very odd or suspicious. 

For example, the app should detect a red alert if a hacker tries to exploit the user's account to withdraw money from a different location. Blocking that particular transaction may prevent further fraud or data breaches. 

Achieving Regulatory Compliance

Compliance, which refers to the adherence to laws, regulations, guidelines, and specifications relevant to the financial industry, is most likely the largest challenge that every financial software must overcome, behind security. This is due to the fact that doing it correctly is often a difficult, costly, and time-consuming procedure. 

This is because many nations need a single fintech-specific rule that app developers need to abide by. 

Passing twelve different financial and consumer laws—each with unique criteria and procedures—will usually be necessary. 

Just look at American FinTech regulations. Depending on its nature, your app may be subject to a number of laws. 

Card transactions are governed by the Payment Card Industry Data Security Standard (PCI DSS) and the Electronic Fund Transfer Act (EFTA), for example. 

The Federal Trade Commission (FTC) has authority over the majority of consumer applications. If you provide services to European users, the New Payment Services Directive (PSD2) applies. 

Due to their intricate administrative and logistical requirements, it's rather simple to overlook a few items while managing these rules. 

Regretfully, these errors may have disastrous outcomes. Regulators have the power to shut down Fintech companies that go awry permanently. 

To exacerbate the situation, the COVID-19 epidemic has introduced more difficulties to an already complex procedure, according to research conducted by the University of Cambridge. 

So, how can one comply with regulations without going crazy?

A shift in perspective is an essential first step.

In particular, it helps to see compliance as an essential first step in earning users' confidence rather than as a rule to be obeyed. 

In the end, a compliant app includes procedures and tools to safeguard user privacy, stop fraud, and enhance services –all of which are excellent ways to increase user trust. 

For example, one of the primary compliance needs for the banking sector is KYC (Know Your Customer) programs. 

KYC is the procedure required to confirm a user's identity and financial background. It guarantees that the user is not affiliated with fraudulent or money-laundering operations. 

KYC is often an extra task for many financial applications. But you'll be much more inclined to do it if you see it as a means of stopping money laundering. 

However, the easiest way to handle compliance is to hire a professional. Engage a consultant or attorney with a wealth of knowledge on Fintech laws in the market of your choice. 

Emerging regtech (Regulatory technology) solutions are another option for automating the laborious steps in your compliance procedure. 

Picking Up the Right Platform to Develop the App

The very dynamic environment in which banking applications operate sees rapid changes in conventions. If they want to survive, they have to prioritize performance, flexibility, and agility. Having the appropriate app platform is essential to this. 

According to our definition, an application's platform includes the architecture and technologies that enable the app to function on both the client and server sides. 

As you can see, your tech stack has several levels. However, choosing a programming language is a crucial first step. 

Recognize that each language has advantages, disadvantages, and vulnerabilities that you should take into account before choosing. 

The most popular languages for finance apps are C++, Java, and Python. 

It would help if you also thought about the operating system you want to use for mobile applications. Although they are the easiest to create, iOS and Android-only applications may restrict your adoption. 

To support additional users, you'll require a cross-platform app.

You may employ a wide range of technologies in this situation, including native applications and cross-platform solutions. Once again, your choice will be based on your project's goals, budget, and scope. 

Considering how common cloud and hybrid networks are, preparing your banking applications for the cloud is essential. This guarantees that, in the unlikely event that it becomes necessary, your software can switch between these environments fast. 

Lastly, consider the integrations you'll need, such as APIs and tools from other parties. Open Banking, which enables you to receive information from a user's bank by connecting with them, will probably be used for banking applications. 

Selecting the Appropriate Characteristics

If a banking app didn't address consumers' issues, its safety and effectiveness would be insignificant. Thus, selecting the appropriate characteristics is essential to success. 

This is particularly crucial in a market that is becoming increasingly saturated. For instance, 2020 research found that by 2026, mobile banking should have doubled in size, growing at a 12.2% CAGR. 

In this highly competitive market, simply providing the same fundamental features as other products is insufficient. You need to have the proper features to draw in and retain people. 

Naturally, we begin by going over the essential characteristics of mobile banking that are mission-critical:

This report from Business Insider is another excellent resource that aligns with what customers want. It's a brief overview of what customers find most important:

It's a great idea to check all or most of the items on the wishlist above to ensure that you're providing people with what they really need from their banking app. 

Ultimately, the key to success in this industry is having the features necessary to provide a fantastic client experience. 

Of course, great features alone cannot achieve that; they must be combined with a top-notch UX. 

Fulfilling the Expectations of the Client

As with every program, a fantastic user experience (UX) is the secret to success. 

On the other hand, UX may be much more significant in fintech. 

This is so that something dull and technical (financial) may be exciting and straightforward to comprehend. This might be the very minimum needed to succeed in this market. 

Sadly, many financial applications fall short in UX. CEOs believe the number is closer to 80%, while just 8% of customers say that most financial applications provide an excellent customer experience, according to a Bain and Company survey. 

It takes more than simply creating a user-friendly UI to make UX successful.

A meaningful and relevant user experience that lives up to their expectations is the ultimate aim, and it's achieved via a comprehensive blend of trust, functionality, user education, customization, and aesthetics. 

The following significant UX trends will enable you to do this. Although this list is for Fintech websites, applications may also benefit from it:

But there's one important UX element that we believe has to be mentioned. It wasn't addressed previously, and it is related to friction in some way. 

Anything that prevents a user from completing an action inside your app is called friction. Since less friction makes an app more straightforward, it seems preferred. 

On the other hand, inevitable friction is advantageous and even required. Asking users to affirm a vital action beforehand, mainly if the effects are irreversible, helps users avoid easy errors. 

For instance, most operating systems will need your confirmation before allowing you to remove a file:

There would have been more angry people with permanently erased data if not for the prompt above.

This also applies to cash withdrawals and payments. A confirming prompt can prevent the mistake of sending the incorrect amount or to the wrong person. 

Alternatively, an additional authentication step ensures all transactions are confirmed before they are performed in the event of unwanted access. 

Obviously, they are just small portions of a much larger UX pie. UX is a broad issue that requires many different tactics and subtleties. 

If you want additional information, see our articles on constructing a suitable app onboarding process and designing a user-friendly app. 

Keeping Abreast on Emerging Trends

The most significant obstacle facing mobile banking may be its rapid expansion shortly. The environment will unavoidably alter due to emerging trends, security concerns, and technology affecting your banking app. 

You must always be one step ahead of the game to keep up.

It's critical to watch for all present and emerging key trends.

Open banking is one of the most pressing issues that you should be aware of. Regulators are beginning to pay attention since it is widely acknowledged that this is the direction that Fintech applications are taking. 

The Consumer Financial Protection Bureau (CFPB) is developing the rules and guidelines governing this program. If you want to be compliant when it comes out, you must stay up with this news.

It is wise to monitor any pertinent regulatory changes to avoid being caught off guard.

Blakchcian is another significant development to watch. Although cryptocurrencies like Bitcoin have been around for more than ten years, blockchain technology's uses outside currency are still in their infancy. 

Decentralized finance (DeFi) will become a significant player in the financial industry. The figures support this prediction:

It is important to watch how big data, AI, and finance combine. This will lead to the development of robotic process automation (RPA) and autonomous finance, improving the integration of Fintech applications into people's daily lives. 

This is just a tiny sample of what's to come regarding banking applications. Check out our essay on the subject to learn more about the following significant financial developments.

Conclusion

Overcoming the obstacles involved in designing banking applications might be challenging. However, this is only true when you approach the task alone.

It would be far simpler to overcome these challenges if you worked with an experienced partner. And because we've developed several popular finance applications, we are the ideal partner to tackle these difficulties!

Are you all set to create the next excellent banking application? Please speak with us now, and let us assist you in navigating the seas.