What Specific Challenges Are Fintech CTOs Worried About in 2022?

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What Specific Challenges Are Fintech CTOs Worried About in 2022?
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Table of Contents
  • Short summary of top 7 challenges for fintech CTOs in 2022
  • 1. Compliance with inconsistent regulations
  • 2. Innovation and competition
  • 3. Mitigating data security breaches in the face of growing infrastructure
  • 4. Adoption of new technologies
  • 5. Hiring and retaining quality engineering talent in a hot job market
  • 6. Public relations and going public
  • 7. Reduction in venture capital funding
  • Final thoughts on the specific challenges fintech CTOs are facing in 2022

2021 saw lots of exciting trends in the fintech space, from payment innovations like voice-enabled transactions to the rise in the adoption of crypto assets.

For the better part of the year, fintech CTOs were occupied with building new systems and scaling existing ones quickly to meet the growing demands of their ever-evolving industry.

As 2022 draws near, CTOs and technical managers gear up for a new phase of challenges across recruitment, compliance with regulations, venture capital funding, and cybersecurity.

This article discusses the specific concerns fintech CTOs have for 2022 and how they plan to tackle them in the coming year. We’ll cover:

  • compliance with inconsistent regulations,
  • innovation and competition,
  • mitigating data security breaches in the face of growing infrastructure,
  • adoption of new technologies,
  • hiring and retaining quality engineering talent in a hot job market,
  • public relations and going public,
  • reduction in venture capital funding.

Short summary of top 7 challenges for fintech CTOs in 2022

  1. The biggest challenge in 2022 will be staying abreast of regulations, especially with fintech innovations like decentralized finance.
  2. Continuing to innovate and staying ahead of the competition will be a necessity alongside the exponential growth of fintech.
  3. Like in 2020, protecting data from internal and external threats is a top concern for key industry players in the coming year.
  4. All fintech organizations are different and upgrading their tech stacks while embracing emerging technologies is a must.
  5. Fintech CTOs expect stiffer competition in the job market as companies compete for quality engineering talent.
  6. Some of the trickiest challenges in fintech are managing human bias to avoid PR crises and adopting a more mature mindset as companies go public.
  7. Rising inflation and higher interest rates will affect the availability of venture capital funding in 2022.

1. Compliance with inconsistent regulations

Aviv Ben-Yosef“Having worked with fintech executives for over a decade and in three continents, I can attest that fintech CTOs do have some unique challenges.

First is the fear of compliance—not compliance itself.

I’ve seen companies scrapping complete product directions because a lawyer gave a hand wavy answer that it’s problematic.

True innovation requires novel approaches, especially in an era where regulation lags behind the industry. Starting to blaze a path forward, knowing that the market will be there in a few years, just might be the right thing to do.”

—Aviv Ben-Yosef,
Tech Executive Consultant and Coach at Aviv Ben-Yosef Consulting

Like in the previous year, navigating rigid and inconsistent government regulations will remain a massive challenge for fintech CTOs in 2022. In light of this, compliance teams need to devise more effective methods of keeping up with new rules and regulations, especially with the rapid changes in the industry.

Specifically, regulatory agencies will pay keen attention to the rise of decentralized finance, rapid developments in the cryptocurrency industry, and other innovations. Experts expect new regulations regarding data privacy, consent, and virtual currency trading.

“The fintech industry regulations have been inconsistent since the start of 2020 and 2022 wouldn’t change much,” explains Perry Zheng, former Engineering Manager at Lyft and Founder/CEO at Cash Flow Portal. “These inconsistent regulations might cause problems for people associated with fintech innovations because regulatory compliance affects access to bank resources.”

In the coming year, fintech CTOs should gear up for more difficult regulatory conversations. Ultimately, they will be more involved in leading discussions about compliance, communicating with regulatory agencies remotely, and ensuring audits and data regulations are handled effectively.

Guido Barosio

“Fintech CTOs must keep up with the constant evolution of technology, regulation, and security threats, at an extremely fast pace. We are on constant guard for the latest security threats and also need to telegraph where new needs and new regulatory priorities will emerge. The needs of financial markets evolve quickly, and technology is delivering every solution, and needs to work in real time.”

—Guido Barosio,
Co-Founder, CTO, and CSO at Finalis

2. Innovation and competition

Edward Mellett“A CTO’s primary responsibility is to foster continual innovation.

The challenge is to stay current with technological advancements without succumbing to the latest fad.

Emerging technologies are reshaping every industry at a faster pace than ever recorded previously. However, when something new is introduced, a CTO should decide whether or not to accept it.

Alternatively, when the old system becomes difficult to maintain and scale, the CTO should determine whether to preserve it or replace it. Occasionally, the race for popular technology can be a cruel joke on the CTO and end up being a nightmare.

However, the issue is twofold. To begin, if engineering managers decide to incorporate new technology, they will require personnel who are familiar with it. Typically, these individuals are scarce and expensive. As a result, a lack of experience in developing technologies complicates the process, prolongs time to market, and increases costs.

On the other hand, if companies do not upgrade their technology stack, their systems will become inefficient and they will struggle to recruit software professionals willing to work with obsolete technologies.”

—Edward Mellett,
Co-Founder and Director at WikiJob

Maxim Manturov“Naturally, as fintech grows, so too does the danger of regulators seeking to harness the power of modern financial services. However, it’s far more likely that the biggest challenges that fintech CTOs will face over the coming years will be in the form of fierce competition. In the wake of the COVID-19 pandemic, the fintech landscape is expanding at a rapid rate, and as a result, more companies are winning the level of custom needed to grow exponentially.

As more challengers enter the space, suddenly, CTOs are faced with the task of innovating away from their rivals and taking more risks on technology that may not be as market-ready. With this in mind, we’re more likely to see new challengers and market leaders emerge over the coming years across the fintech landscape than in most other tech-based industries.”

—Maxim Manturov,
Head of Investment Research at Freedom Finance Europe

3. Mitigating data security breaches in the face of growing infrastructure

“Hackers exploit new technologies to attack global corporations in many ways. Since the outbreak, cyber-attacks have skyrocketed.

Cybercrime will cause $10.5 trillion in damages by 2025. Every week, malware attacks 18.5 million websites, hitting them 44 times on average. While malware is a form of cyber-attack, ransomware is something to be wary of.

Ransomware is a type of harmful software that threatens to destroy an organization by withholding access to data until the hackers are paid a ransom. A ransomware attack accounts for 81 percent of all financially driven attacks, and 50 percent of cybersecurity professionals feel firms are unprepared to defend against it.

A data breach typically costs $3.86 million. This data might also be shared with third parties, affecting your finances and reputation. So, CTOs must be ready in 2022 to fight security risks, strengthen infrastructure, and save millions of dollars.”

—Edward Mellett,
Co-Founder and Director at WikiJob

Data security remains a top concern for fintech professionals as the volume of digital transactions increases exponentially.

Peter Cavicchia, Chief Technology Officer at Fiserv, believes that “financial services are a prime target for cybercrime, and, as our technological systems grow increasingly complex, failure to maintain comprehensive protections can result in the accrual of significant cybersecurity debt.”

With the market size for digital payments forecast to reach $236.1 billion by 2028, growing at a CAGR of 19.4% from 2021 to 2028, fintech companies require more robust, transparent, and reliable infrastructure for secure user data storage.

In 2022, data privacy will be the most critical factor deterring consumers from using fintech products. Customers want to be fully involved in the data transactions.

“We will see more inclusiveness and a more integrated customer experience. We are going to see the shifts happening in banking, transforming from a transactional relationship to an emotional relationship. The future is more about a customer-based focus than it has been in the past,” says Deep Varma, Chief Technology Officer at Varo.

With the increased adoption of open banking, users’ concerns around data transparency will become greater in 2022 as CTOs struggle to mitigate risks and reassure their clients in light of multiple cybersecurity breaches in the previous year. Customers always want to know how their data is being used. So, any privacy concerns mean that the company’s reputation will take a huge hit.

In the words of Hazel Olivier, Chief Technology Officer at Nimbla, “In fintech, your data is like candy to a hacker.” So, in addition to securing users’ information, CTOs are also concerned with keeping sensitive company data safe from internal danger in 2022, especially with more companies relying on fully-remote teams.

“We hate to think about it because we all trust the people we work with. But making sure you protect your systems from a potential bad actor internally is paramount,” says Edward Obuchowski, EVP and Chief Technology Officer at Advisor Group.

Michael Thorne, former CTO at Bristlecone Holdings, believes that “data security is never done. Security is the thing that keeps me up at night. The minute you think you’re secure, you’re at risk again. Being on top of it is nearly impossible.”

CTOs will continue to monitor data infrastructure strictly and embrace the latest cybersecurity innovations to enhance data privacy and transparency across the board in the coming year. “In the end, you have to build a comprehensive ecosystem that allows the company to protect itself,” says Edward Obuchowski.

4. Adoption of new technologies

Jane Gavronsky“Fintech CTOs are faced with a variety of challenges, but the rate at which new technologies are being developed creates urgent needs to communicate their benefits to the C-Suite and others not involved in their development.

From an open source perspective, there is the task of educating financial institutions and the industry as a whole about the benefits of open source adoption and fully embracing its technologies to innovate fast, deliver on strategic objectives, and to optimize core business operations.

Of course, there is also the need to keep abreast with evolving regulatory and security compliance standards to ensure that solutions meet and exceed expectations.”

—Jane Gavronsky,
CTO at FINOS

Desh Weragoda“The biggest issue is finding the right software that fits with your organization’s needs. Each business functions differently. The initial setup is the challenge, finding the right products, since there’s a lot of competition. Do we build custom, or go turnkey? How do we stay in touch with customers, our sales and operations teams? There's a lot of evaluation and a heavy upfront investment.”

—Desh Weragoda,
CTO at MBANC

5. Hiring and retaining quality engineering talent in a hot job market

John Li“Fintech evolution is happening at an ever-growing pace, so IT staffing can be a real issue, especially during a time when the tech skills gap is at its widest.

New cutting-edge technology is leaving the slower learners of the industry behind, which means most fintech IT teams are running short-staffed over the long term.

One way to help the situation is to locate your offices in tech bubble locations where the talent pool is rich or hire remotely, so you can open yourself up to a national pool of applicants.

CTOs across all industries are dealing with the skilled labor shortage, but fintech is feeling those effects harder than others, simply because they’re growing much faster than other sectors.”

—John Li,
Co-Founder and CTO at Fig Loans

Fintech CTOs anticipate recruiting and retaining top engineering talent will be more challenging in 2022, especially with more remote and fully distributed teams. In the UK, for instance, experts project that the growing IT talent shortages would hit a record high of 3,200 skilled workers within the decade.

While remote work has expanded access to a global workforce, there’s a lot more competition, especially for smaller companies vying for talent with industry giants that offer better remuneration, flexibility, and opportunities. The common concern here is that smaller startups running on a limited budget cannot afford the high rates needed to hire and retain quality engineers.

Nate Tsang, Founder and CEO of WallStreetZen, says, “I expect recruiting to become more difficult in 2022. Global hiring and remote work were boons to our companies when everyone was shifting to remote, but now that the field is more stable than in the pandemic, smaller companies have their work cut out for them.

You have to find a way to break through the endless LinkedIn messages candidates receive and make them an offer that stands out. We need less corporate jargon and obfuscation of work duties and more emphasis on providing stable growth opportunities to our best talent.”

2021 already set the pace for the “candidates’ market” with reduced unemployment rates and increased reliance on digital technologies. And with the fintech market size expected to hit $310 billion in 2022, there will be stiffer demand for the limited amount of available engineering talent.

To cope with the dearth of a talented workforce, fintech specialists expect increased reliance on third-party support for executing specific projects. However, outsourcing comes with its own set of unique challenges.

6. Public relations and going public

Michael Needham“Predicting risk is a risky business, and perhaps no one knows that better than a fintech CTO. One of their biggest and most dangerous challenges is avoiding PR disasters caused by their tech.

For example, a predictive learning model that was trained using human bias can manifest racism. The bot’s harmful decision-making can hurt a lot of people, and it can destroy a company’s branding.

That means fintech CTOs absolutely have to double-check their algorithms for human bias. It’s a unique pressure that I don't think you see as much in other industries. And, dealing with it requires a special kind of sensitivity—one that maybe fintech CTOs did not think they would need going into their careers.”

—Michael Needham,
CCO at Finturf

“Fintech has a clear cognitive dissonance for the CTOs. Being a startup, their entire offering is often about doing things in a new and creative approach, or even merely differently. They are the new players on the block and they want to move fast. That is hard to balance with the need to show external partners that the team is cautious and mature.

I’ve seen several fintech unicorns replace top executives pre-IPO in order to make them more ‘representable’ before going public. Looking at recent IPOs and SPACs, this seems to be overly common in the fintech sector. In my work, I’ve had to help my clients realize that genuine executives cannot focus solely on the tech, and teach them how to comport themselves in the boardroom.”

—Aviv Ben-Yosef,
Tech Executive Consultant and Coach at Aviv Ben-Yosef Consulting

7. Reduction in venture capital funding

For the past decade, fintech startups have enjoyed a bull run regarding availability and easy access to venture capital.

As of 2021, the CB Insights State of Venture Q3 ‘21 Report placed the total amount raised in global fintech funding at a whopping $91.5 billion. According to Tejas Konduru, the Founder and CEO of mobile commerce startup Via, the speed of fundraising has been astronomical in recent times, with founders securing seed rounds in one month and Series B rounds taking “two days now.”

However, things might be changing in the coming year, posing a threat to business scalability and expansion.

“With rising inflation and higher interest rates, we will likely see a reduction in the availability of venture capital for fintech in 2022,” explains Ankur Patel, Founder and Head of Data at Glean. This reduction in venture capital availability for fintech will predominantly affect two areas: the time founders take to secure funding and the amount of money closed with each investment series. These changes will impact the amount of capital available for technical projects in the coming year.

Ultimately, investors will have higher expectations and pay closer attention to how fintech companies utilize funding. Ankur Patel believes that “there will be an increased focus on burn rates instead of just top-line growth. This is where having better spend management visibility with tools like Glean will help.”

Final thoughts on the specific challenges fintech CTOs are facing in 2022

“Being a fintech CTO is extremely challenging, but also extremely rewarding. We are front and center in the fintech revolution and get to build the markets of tomorrow.”

—Guido Barosio,
Co-Founder, CTO, and CSO at Finalis

There’s no doubt that 2022 will present unique challenges for the fintech industry, with CTOs and technical managers at the forefront of navigating possible pitfalls.

According to Rakibul Alam, Head of Engineering at Circle Fintech, “Free trades without the hassle of cash will be the game changer for fintech in 2022. But to achieve this, we need to address concerns regarding trust, security, compliance with regulations, and data protection.”

In the end, what matters most is how key fintech players reinvent strategies and leverage collaboration to meet these challenges and achieve unprecedented growth.

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