Kreatik talks – Przemek Górecki about the challenges and future of the fintech industry and debt… technical debt. ;)

Joanna Tulińska-Ładomirska, UX Desiger in Kreatik, talks with Przemek Górecki – CTO at Altkom Software & Consulting, and a coach at Altkom Akademia about challenges, the future and the current situation in the Polish and foreign fintech markets.

Hi Przemek, thank you for agreeing to be interviewed. To begin with, please say a few words about yourself.

– I am currently CTO at Altkom Software & Consulting and a trainer at Altkom Academy. In my spare time, I am involved in mentoring and artificial intelligence. I have over 20 years of experience in management and technology development in the fintech and banking industries. For 11 years I was associated with Ailleron SA, where as Head of Operations and later General Manager I was responsible for implementing innovative technological solutions in the financial sector. Before that, for 13 years at BNP Paribas, I worked in positions ranging from IT Manager to Director of Electronic Sales Channels.

Your experience is impressive! What are the biggest challenges for fintech companies today?

There are many challenges fintech faces today. Here are some of them:

• Competition with traditional financial institutions: Fintechs are competing with banks and other conventional financial institutions, which are also entering the fintech market, innovating and improving their services.

• Security and privacy: As the volume of financial transactions carried out by fintech increases, so does the risk of identity theft, financial fraud, and privacy breaches. Fintechs need to provide an exceptionally high level of security to their customers to gain their trust and maintain their reputation.

• Regulation and compliance: Fintechs must comply with various laws and regulations, including banking laws, data protection, money laundering, and tax. Proper compliance with these can require a great deal of money and time.

• Increasing costs: As fintech grows, so do the costs associated with developing and maintaining technology, creating new products and services, and ensuring a high level of security.

• Customer acquisition: Increasing competition in the fintech sector influences the acquisition of loyal customers, and their maintenance, making this more difficult than before. Nowadays, customers expect fintech to provide appealing offers that attract and encourage them to use particular services.

• Financial support: Fintechs often need large amounts of funding to develop their services and products. However, raising capital can be difficult, especially for smaller, not yet well-established fintech companies.

• Technology and innovation: Fintechs shall keep up with the rapid pace of change in technology and innovation to remain competitive in the market. However, these innovations often require enormous financial and technological investments and skilled employees.

• People management – with the market still for an employee, skillful employee acquisition and retention becomes crucial, especially for smaller and new companies. Creating an employee-oriented culture, providing development for people, and the still much-underestimated feedback is the bare minimum these days.

What trends focused on building a positive user experience are you seeing in the fintech industry?

– Customer Experience is a series of interactions designed to create a long-term customer relationship with a brand. To create and perpetuate positive experiences and emotions it is crucial to put the customer at the center of the experience, no matter at what stage of their journey they come into contact with the brand. At the moment a reinforcement of trends appears as the financial industry has been facing for a long time.

• Personalization: Customers expect a personalized approach to their needs and preferences. To satisfy expectations businesses use increasingly sophisticated tools and technologies such as artificial intelligence and machine learning to deliver personalized customer experiences.

• Omnichannel: Customers use multiple communication channels, such as email, phone, chat, social media, etc., and companies should provide a consistent and integrated customer experience across all these channels.

• Quick and immediate service: Customers expect fast and prompt service, so companies must provide real-time responses and immediate troubleshooting.

• Simplification of processes: Customers value simplicity and ease of use, and keeping that in mind, companies must work to eliminate unnecessary steps and processes to make it easier for customers to use services.

• Expertise and knowledge: Customers expect customer service staff to have the proper knowledge and expertise in the products and services offered, so there is a need to invest in staff training and development to ensure quality service.

• Engaging customers: Customers want to be involved in the purchasing and service process, therefore the use of various strategies such as loyalty programs, interactive marketing campaigns, and online communities to engage customers and build lasting relationships is often the way companies take to engage customers.

What technological innovations are currently gaining traction in the fintech sector, and what changes do you foresee in the industry over the next few years?

– In my opinion, the future of fintech companies is promising. I predict that companies will play an increasingly important role in the market. PayPal or Stripe are already big players, and they will become increasingly important. Changes in customers’ payment behavior, the growing popularity of online commerce, and the increase in cashless transactions will contribute to the further development of companies in this industry. The creation of Open Banking standards, which is still not being properly exploited, is also having a major impact on this industry. My top 3 predictions:

• Fintechs offering cyber security services: With the increasing number of hacking attacks and cybercrime, companies offering cyber security services are set for significant growth in the future. 

• Fintech related to lending: Companies offering alternative sources of finance, such as lending platforms or peer-to-peer lending, or buy-now-pay-later, may become more important in the future. Increased competition in the lending market and growing demands.

• Fintechs offering artificial intelligence services: Artificial intelligence is becoming more prevalent in various industries, including the financial sector. Companies offering services based on artificial intelligence have the opportunity for significant growth in the future. In my opinion, companies that do not know how to harness the potential of their data will not be relevant in the market in 10 years’ time – Data Monetisation.

What are the challenges of developing software for fintech companies and what processes ensure the smooth implementation of new solutions?

– The risks associated with the following challenges must be kept in mind: technical debt arises when, in order to meet business needs quickly, we take ‘shortcuts’ and reach for suboptimal technical solutions – solutions that make it difficult or even impossible to achieve the company’s future goals. Further development, e.g. new investments or improvements to specific processes in the organization, are only possible after catching up, i.e. paying off the technical debt.

The 3 most important aspects you need to focus on are:

In your opinion, what is the direction of further development of the fintech industry in terms of increasing security levels? 

– Security, as I mentioned earlier, is a pillar of any fintech development. Here are some trends that can be seen in terms of increasing the level of security in the fintech industry:

• The development of biometric technologies, such as facial recognition, fingerprints, or iris scanning, is increasingly popular in the fintech industry. These technologies allow for an increased level of security as they are difficult for unauthorized persons to falsify.

• Using artificial intelligence to detect fraud for example by analyzing customer behavior and detecting anomalies.

• Secure data storage – fintechs are increasingly using data encryption to help prevent unauthorized access to customer information. In addition, they invest in blockchain technology to store data securely.

• Continuous security updates prevent new threats so they invest in research and develop new tools to keep their users safe.

• Cooperation with the regulators to ensure compliance with legal and regulatory requirements. In this way, they can avoid financial sanctions for breaches of regulations and contribute to customer security.

What analytical tools are worth using to better understand customers’ needs and improve their experience of financial products?

– It is worth remembering that each research tool has its own advantages and disadvantages. When using several different research methods, more comprehensive and relevant results can be obtained. It is also important to conduct research regularly to stay on top of customer needs. Here are some of them: data analysis, surveys, focus groups, user testing, competitor analysis, and protypification (Especially important when you are developing a product that is new to the market and has not been implemented by anyone before you. Here, the rule of thumb is to validate the idea at every stage, collect feedback, update the product, and re-validate).

What are the most common challenges encountered in the customer acquisition and retention process, and what tools are worth using to increase retention?

– To overcome challenges in the customer acquisition and retention process, companies need to be flexible, respond quickly to changing customer needs, provide personalized solutions, offer competitive pricing, and keep their customers’ data secure.

Here are some of the challenges that may arise in this process:

• Competition – the fintech industry is growing rapidly and the market is increasingly competitive. Competition can make it difficult to attract and retain customers, as customers have many different options to choose from. Companies, therefore, need to offer something unique and appealing to customers.

• Trust – the fintech industry requires trust from customers as they use the platform on which their financial data is processed. Hence, one of the biggest challenges is to build customer trust and reassure them that their data is safe and protected.

• Personalization – customers expect companies to offer them personalized and tailored products and services. It is important that companies are able to deliver personalized solutions that attract customers and meet their needs.

• Usability and ease of use – customers expect fintech platforms to be easy to use and offer an intuitive interface. Companies, thus, need to provide their customers with easy access to information, a simple and intuitive interface, and fast and efficient tools.

• Cost – customers are increasingly cost-sensitive and expect fintech products and services to be offered at affordable prices. Firms need to offer competitive prices and at the same time deliver high-quality services.

How does ASC collaborate with traditional financial institutions and how do these relationships build valuable products?

– Our long-standing cooperation is primarily based on mutual trust. We have clients who have been with us for 20 years and are very satisfied with our services. Because we have experts who can support the client in every stage of the software development process (product discovery, analysis, design, development, deployment, and maintenance), our cooperation starts at different levels. Sometimes it happened, starting with the maintenance of a system, that our client already had. Then we started to develop it together with the client. 

However, the most common scenario is when we start with the product discovery phase, where we address the following risks together with the client:

• Re-inventing the wheel
• Low/no demand in a target group 
• Missing important opportunities 
• Financial profitability not assured
• Unexpected scope increase
• Unpredicted budget increase

Then, going through the phases, we provide the client with a product that “solves their real problem”.

We work in different configurations:

• Autonomous – where only the Product Owner is on the client side
• Dedicated – where the client manages the entire project – i.e. Product Owner, Analysts, Project Manager/Scrum Master on their side
• Mixed – our employees are part of our client’s teams

What are the regulatory and regulatory challenges for the fintech industry in Poland that are changing the day-to-day market of the industry?

– Fintech has to comply with various laws and regulations, including banking laws, data protection laws, money laundering laws, and tax laws. Proper compliance with these can require a great deal of money and time. Complying with these sometimes exorbitant requirements requires a lot of money, which is a serious problem, especially for companies in their start-up phase. 

Key areas to bear in mind would include:

• Diversity of regulations – the fintech industry operates globally and is regulated by different countries. The diversity of regulations can make it difficult for fintech to operate and require them to adapt to different standards and procedures.

• Lack of clear definitions – some fintechs activities do not have clearly defined regulations which can lead to confusion and uncertainty about requirements.

• Speed of change – the fintech industry is changing very rapidly and regulations often cannot keep up with these dynamics. This can lead to situations where regulations are outdated or unable to adapt to new technologies and services.

• Data security – the fintech industry operates on customer data, which requires a high level of security. Putting the right regulations in place in this area is key, but it can also be challenging to adapt constantly to evolving cybersecurity threats.

• The need to work with traditional financial institutions – many fintechs operate in a partnership or under license from traditional financial institutions. This requires an understanding of the differences in regulation and the integration of fintech into existing financial systems

How does the fintech industry deal with tech debt?

– There are no major differences between fintech and other software companies. The only difference is that fitnechs, especially in the early stages of growth and acquiring financings, consciously incur debt even in their key processes.   to verify the hypotheses as quickly as possible, and then, after raising further rounds of funding, this debt can be repaid. 

When it comes to the technical debt management approach, we use the following tools:

• Awareness – it is important to know that there is such a thing as technical debt. It should be treated like any other debt (e.g. a loan from a bank). It does not have to be a negative phenomenon, it is important to use it very consciously. In the long run, like any debt, it is unprofitable, but sometimes it is worth using it. This awareness must also be built at the project sponsor level to avoid misunderstandings in the future.

• Register – keep a record of the debt incurred, which of course must be agreed upon with the business side e.g. Product Owner before it is incurred. The items recorded here are the input for subsequent sprints in which such debt should be paid.

• Process – build a process in the company that allows you to record the debt and its successive repayment. It is important that awareness of the existence of this process among the members. Everyone can report the debt and its costs.

• Prioritization – this is another important technique to keep technical debt under control. The team, together with the Product Owner, decides the order in which the debt is to be paid in subsequent sprints.

• Meetings – hold regular meetings with the team, managers, and Product Owner

• Standards – introduce coding standards that minimize the likelihood of debt

• Refactoring – this essential tool should be used on an ongoing basis as part of system development. For ‘small’ changes this should be done on an ongoing basis without the need for logging. Medium and large changes should be registered and according to priorities implemented.

What does the fintech industry look like abroad and how does the Polish market differ from the European market and how does the European market differ from the global market?

– The fintech industry is a complex ecosystem that includes many different sub-sectors and products. There are some differences between Polish fintech and foreign fintech due to differences in market conditions, regulations, and consumer preferences.

One of the main differences between Polish and foreign fintech is the degree of market penetration and access to funding. The Polish fintech industry is relatively young and just starting to develop, while in some countries, such as the UK or the US, the industry is already well established. For this reason, Polish fintech often has fewer financial resources and finds it more difficult to gain the trust of customers.

Another difference between Polish fintech and foreign fintech is the availability and usability of technological infrastructure. In countries where the technological infrastructure is well developed, such as the UK or the US, fintech has easier access to the tools and technologies they need to develop their products. In Poland, although the situation has improved in recent years, there are still some infrastructural limitations that may hinder the development of fintech.

Financial regulation also varies across countries which can affect fintech development strategies. Poland has regulations that are fairly similar to those in other EU countries, but still, require some compliance efforts from fintech.

Finally, cultural differences and consumer preferences can influence what products and services are popular in a given country. In Poland, for example, traditional financial services such as loans and bank accounts are still popular, while in other countries customers are more likely to use modern investment products offered by fintech.

Thank you for the interview and for sharing your knowledge!

– Thank you!