What Specific Challenges Are Fintech CTOs Worried About in 2022?

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What Specific Challenges Are Fintech CTOs Worried About in 2022?
Table of Contents
  • Short summary of top 4 challenges for fintech CTOs in 2022
  • 1. Hiring and retaining quality engineering talent in a hot job market
  • 2. Reduction in venture capital funding
  • 3. Mitigating data security breaches in the face of growing infrastructure
  • 4. Compliance with inconsistent regulations
  • 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:

  • hiring and retaining quality engineering talent in a hot job market,
  • reduction in venture capital funding,
  • mitigating data security breaches in the face of growing infrastructure,
  • compliance with inconsistent regulations.

Short summary of top 4 challenges for fintech CTOs in 2022

  1. Fintech CTOs expect stiffer competition in the job market as companies compete for quality engineering talent.
  2. Rising inflation and higher interest rates will affect the availability of venture capital funding in 2022.
  3. Like in 2020, protecting data from internal and external threats is a top concern for key industry players in the coming year.
  4. The biggest challenge in 2022 will be staying abreast of regulations, especially with fintech innovations like decentralized finance.

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

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.

2. 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.”

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

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. Compliance with inconsistent regulations

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.

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

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.

Enjoyed reading this article? Check out some of our other resources to help you tackle fintech challenges and more in the coming year:

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