Fintech and AI - this duo is more than just a couple of buzzwords. Here is why.

After founding Solidstudio, Pawel was an originator in terms of pursuing expertise in eMobility. With the build-up of a solid knowledge-base on industry’s needs & wants, he now keeps a close eye on products’ development. He’s also hugely responsible for the business’ side and designs the business models for our products.

Paweł Małkowiak

Artificial intelligence (AI) is currently one of the hottest buzzwords of the tech scene. IT professionals in the financial industry services sectors were among the first ones to realize what business benefits it may bring to banking companies. As a result, financial institutions were among the early adopters of the technology, paving the way for AI to spread across other industries.

 companies were the ones to jump on the AI bandwagon early on. They were followed by large banking institutions with multi-million dollar budgets to spend on digital transformation and solutions based on AI technologies such as machine learning (ML).

No wonder that the organizations in the financial sector became the primary drivers of AI Research and Development initiatives in FinTech. They're also projected to be the ones to support the FinTech startup ecosystem and bridge the AI knowledge gaps in other, more traditional sectors.

 predicts that by 2030, AI technologies will allow banking institutions to reduce their operational costs by 22%. In the long run, the savings achieved by financial institutions, thanks to AI are expected to reach $1 trillion.

Why are so many FinTech startups and large banks investing in AI? Here are a few good reasons why AI has gained such a prominent position in the financial services tech scene.

One of the critical strengths of AI solutions is their efficiency in handling unstructured data, be it images, videos, geographical location, transactions, and time series. That's why AI-powered solutions are used to assess risks and improve risk management, grant credit scores, detect fraud, automate claims cases, and much more. AI solutions allow introducing a different style of management that is based on insights from data. In the future, banking leaders will be asking strategic questions to machines, in addition to human experts. Able to analyze massive collections of data, machines will support key aspects of decision-making.

In financial services, predictive analytics solutions will be used to shape the overall business strategy of FinTech organizations, nurture sales, optimize resource use, and generate revenue. Such tools will gather and arrange data, analyze it using cutting-edge AI algorithms to deploy customized solutions for internal users or customers.

Experts predict that AI will take current predictive analytics tools to the next level. It will help organizations boost internal processes and improve their operational efficiency – all in the effort to build a competitive advantage.

For example, predictive analysis tools will be responsible for calculating credit scores, and offering FinTechs insights about the future decisions of customers or employees (for example, what a consumer is going to buy).

Another critical area where AI technologies bring tangible value is customer service and relationship management. Banks can use AI-powered 

 to provide prompt replies to customer queries and improve the overall experience clients have with their products and services. Such chatbots will be able to deliver human-like customer service and offer expert advice at a meager cost to the organizations. What's more, chatbots can be available 24/7 and never take days off.

Virtual assistants can be enriched with AI as well to help walk the customer through the bank's offer, improve the user journey, and provide personalized calls to action to increase goal conversions. Both chatbots and virtual assistants will help FinTech organizations save time and money on providing customer service, all the while improving their quality thanks to the capabilities of AI.

AI-powered analytics tools constantly analyze data to detect suspicious transactions that could be fraudulent. AI solutions can monitor behavioral patterns of users and identify actions that depart from the norm and could indicate fraud attempts or incidences. These instances will be then transferred to human employees for consultation, saving them plenty of time.

Another area that stands to benefit a lot from AI is claims management. Machine learning is already being built into different stages of claim handling mechanisms. Banks are now taking advantage of AI to handle a massive amount of data is short timeframes. That's why AI solutions will reduce the overall processing time of claims and their costs – all the while improving the customer experience by making handling specific claims faster. Moreover, AI systems are continually learning from the data they process and will be able to adapt to new, previously undiscovered cases, enhancing their detection capabilities over time.

AI will have a huge impact on insurance management, as well. Such tools will help automate the underwriting process and process more data to make the best possible decisions for customers. Financial services companies will take advantage of automated agents who will assist users online, supporting them at every step of the way in identifying insurance requirements. AI solutions will accelerate the underwriting process and help to integrate different sources of data for more precise assessment. Insurance providers will use AI solutions to identify risks and then lower the probability of damages to the party insured, as well as the insurer.

FinTechs are busy applying AI to services that were previously reserved for select groups of customers. For example, they offer digital and wealth management advisory services to lower net worth market segments at relatively low fee-based commissions. An example of such an implementation is smart wallets. An AI-powered smart wallet monitors and collects insights about a user's behavior and actions to help them change their personal finance habits for saving purposes.

Another solution adjacent to automated wealth management tools is a virtual financial assistant. FinTech companies will be developing such a tool to deliver outstanding customer experience. Virtual financial assistants and planners will help customers make the best financial decisions. They will monitor events, identify and report on stock and bond price trends in relation to the user's financial goals and portfolio. They will make data-driven recommendations of bonds and stocks to sell or buy. Such robotic advisors are becoming increasingly popular among both cutting-edge FinTech startups and established financial companies.

Now that you know why AI offers such potential to organizations in the financial services sector, here are a few FinTech use cases that make use of AI.

Automating the analysis of loan agreements

JP Morgan is using AI to revamp its loan agreement analysis. The bank has recently introduced a brand new product called the Contract Intelligence platform (CoiN) customers can use to analyze such agreements, underline the key terms and conditions, and identify critical data. In the past, the same work took JP Morgan's employees 360 thousand working hours to complete.

Developing innovative payment technologies

Bank of America is planning to revolutionize the way we use ATMs with an AI-powered virtual assistant. The assistant is integrated into the bank's mobile app and a number of ATMs all over the US to enable customers to navigate the bank's offer better.

Another American bank, Wells Fargo, has recently announced that it's looking to create a special AI team which will be responsible for payment technologies and enhancing services for corporate clients. The team is set to create a technology that will enable the bank to deliver a more personalized customer experience in the online channels by making relevant recommendations on financial products.

Many large banks are now investing in and forging collaborations with innovative FinTech startups to get access to cutting-edge technologies. An example of such a strategy is Citi Bank, which has invested in several AI startups like Feedzai that use AI to fight fraud.

The emergence of AI had a massive impact on technological developments in the financial services space. Because of its many potential benefits, we can expect a radical increase in automation in the financial industry. Some of these automation solutions will implement AI algorithms to perform sophisticated tasks and learn from the data sets which they process.

Innovative technologies such as artificial intelligence offer the financial sector an unprecedented opportunity to reduce costs, improve the customer experience, and increase operational efficiency.

But the path to advanced AI adoption in banking is riddled with specific. For example, large banks suffer from a lack of qualified data analytics specialists and qualified AI developers. That's why they turn to specialized software development agencies that provide skilled engineers with experience in FinTech. Such teams will be instrumental in diagnosing, conceptualizing, developing, and commercializing these new solutions.

Are you looking for a team of AI developers who work in FinTech? Get in touch with our consultants, we help FinTech startups and large banks to make the most of innovative technologies.

How to secure a fintech apps offer a high level of security?

Being a co-founder of Solidstudio, Paweł has got to see all the development phases. He’s a skilled professional with years of experience, both in the software and in the eMobility worlds.

Paweł Głogowski

The financial world is currently undergoing a profound disruption caused by the emergence of innovative financial solutions offered by startups. Fintechs have grown into a significant competition for the traditional banking giants which are struggling to retain customers. That's especially true for the Millennials who are attracted to innovative banking products that match their preferences.

And traditional financial institutions have a reason to worry because fintech is on the rise. According to KPMG, the global fintech market size reached $111.8 billion in 2018 – representing a 120% increase compared to 2017.

By taking advantage of technologies such as robo-advisors or blockchain, fintech companies offer alternatives to conventional financial solutions. However, they all face one challenge: fintech security. The financial services industry is uniquely vulnerable to security breaches. Developing fintech apps means paying extra attention to that aspect.

Fintech app security and data protection are serious topics for anyone hoping to develop a successful financial app. Here's how software development teams make sure that their fintech apps offer a high level of security without compromising on performance.

1. Prepare methods for authorization, authentication, and identification

A fintech app needs to have measures in place that enable the product to make sure that users are really the people they claim to be. To confirm user identity, your app needs to include an identification and data authorization system, which is flawless. For example, you should ensure that the API restricts access to all areas that are significant in your app. Another measure worth considering is two-factor authentication. Offer users with maximum security but always balance it with minimal effort on their side (for instance, during the registration process).

This method is a great option to improve your app's security. Move beyond the primary authentication method (username and password) and include two-factor authentication in your app. Many fintech apps use one-time codes that are sent to users through SMS or email. Another popular 2FA method is push notifications that allow authenticating with a single touch.

Secure your fintech app right from the start with a security code. Note that all the sensitive data your app will be processing is going to be stored on the server and user's device. That's why it's smart to plan to security early on – and code plays a key role here. Always look for potential security gaps in your application. Pay attention to any vulnerabilities or flaws in your source code. Test everything you ship to deliver a product free of any security loopholes.

It's crucial for a fintech app to have a transparent scheme of authorizations and roles which define which actions users can perform and which areas they can access. Naturally, every user who accesses the app needs to pass the authorization process. Note that every user should also have a role assigned to them; it defines what access level they hold. To ensure that, your app needs a user management engine in place. Lust all the actions in your user management console. Sketch all the permissions given to access specific areas as well.

5. Keep an eye on backend network connections

Your cloud servers need to be protected against unauthorized users. Make sure that your API is secure as well to prevent any data leaks. It's also smart to create special spaces where you'll be storing all data and documents at full security. Also, don't forget about running tests to assess the vulnerability of your app to network threats. You should also apply transport layer security (TLS) to all the traffic. Consider providing additional security with the help of a virtual private network (VPN).

6. Make users come up with complex passwords

There's no harm in forcing users to use passwords that are more complex than "Password1234". Your app will be dealing with money transactions, so it needs strong authentication measures. While the username and password are ubiquitous, they can get easily stolen or lost. That's why fintech startups often force users to come up with complex passwords – and then change them every few months. Feel free to enforce passwords with an extensive character set; the security of your app is the most important factor in its success.

7. Invest in a good mobile encryption policy

If your fintech app processes data that features many variables, you need to keep a close eye on gaps – even if that data is stored only temporarily. Preventing data leaks is critical for the success and reputation of your product. Data protection by encryption is a common strategy among fintech companies. Make sure that your mobile databases are encrypted to secure locally-stored data. To ensure top security, pay attention to how you manage the encryption keys.

You may be rushing to release your app to market. But it's smarter to release a high-quality product than a buggy one, especially when it comes to fintech. That's why it pays to test your application at every stage of its development. Testing your security measures is key here. You simply need to double-check that everything is working before showing your app to the world. Look for weaknesses in areas such as authorization, authentication, session management, and data security. Make sure to check how these features perform in real-time too.

9. Take extra care about third-party components

Managing third-party components is an essential security area. And you need to start doing that as soon as possible, continuing to monitor it regularly. In recent years, we've seen many third-party components that cause serious security issues and risks. The Heartbleed bug is an excellent example of the risk that comes with third-party components. Make sure that you're using the latest versions of your components. Maintain and monitor them, check for alerts for reported vulnerabilities, and set a policy for action in case one of such problems is found in dependency of your app.

Log every user activity from every user, all the time. You may log data such as the action itself (for example, a transaction), as well as user ID or account, geolocation, IP address, device data, and others. Make sure that the logs are accessible during a potential post-mortem analysis' when you review an incident that has occurred from every possible angle. Logs contain plenty of valuable information for creating insightful incident post-mortem reports. Such reports usually include root cause analysis, incident details, and a timeline.

11. Monitor transactions carried out in your app

Don't forget that operating systems are a vital foundation for your infrastructural security. You can improve this layer by implementing all the system updates consistently and regularly. You can find many different services that help to automate the maintenance of your operating system – for example, Microsoft's Software Update Service or Red Hat's up2date.

12. Maintain application servers and operating systems

Users install fintech mobile apps on their smartphones and access them on a regular basis. That's why you need to consider the security of the mobile device as well. Educate your customers to ensure that they know what to do in case they lose their phone due to theft or other reasons. If you're toying with the idea of removing the protection provided by the manufacturer, stop right there. This may compromise the security of your app. Also, recommend using only authorized app stores to your customers.

Use a VPN to establish a secure connection and prevent unauthorized devices to get access to your system. They should be blocked by a system firewall, your antivirus solution, or another program. Take these additional security steps, and you'll ensure that no unauthorized user can access your application.

15. Hire developers who know how to secure fintech apps

Experienced software engineers know how to protect fintech apps and users against the dangers, risks, and threats that come with processing sensitive data. Investing in top expertise for building your fintech app is a smart move because it ensures the success of the entire project.

At Solidstudio Software House, we have plenty of experience in building fintech products and ensuring security at every stage of the application development. We know how to expand the features of your fintech application and make it more secure, never compromising on its look or performance.

Are you looking for a team of fintech experts? Get in touch with us; we help fintech companies develop applications that are free of any security issues.

How to offer a high level of security without compromising on performance?

How to secure a fintech application

True cost of software outsourcing - how can you meassure this?

Software development outsourcing is the term used when a technology company is hired to create and build a business’ IT systems. A hugely beneficial practise, outsourcing in this way can help small to mid-sized companies in particular not only gain a competitive edge, but significantly reduce costs and implementation time.

While the premise of software development outsourcing is quite simple and its benefits clear, finding a reputable company to deliver such services can be a challenge. Google ‘software development companies’ and the result is seemingly endless pages of vendors offering their services at competitive rates. So how do you know which of those developers will properly fulfill your needs and offer true value for money?

Knowing what to expect from a vendor, from both a service level and cost perspective is vital before choosing the best 

 for your business. There are a number of considerations that will help you identify a reputable software development company, all of which are detailed here, plus how much you should expect to pay for such services.

Software development outsourcing: What to consider

Outsourcing software development involves a significant level of trust from both parties to work successfully. More often than not, a business will have to share confidential and valuable data in order to get the IT systems it requires. Any reputable software development company will understand this and offer a service that not only meets a brief from technological perspective, but a human one too. To find a tech partner who will do just that, look out for vendors with the following attributes:

 – A reputable software development company will be sympathetic to their line of work being highly specialised, and will therefore help clients form requirements, ask difficult question and make sure all parties are completely clear on the business’ objectives

 – Making sure a software development company has the right skillset to fulfill technical requirements is vital, as any gaps in knowledge could lead to costly delays. A close look at a vendor's portfolio will give a good indication of whether the team possesses the correct skills, across the most relevant technology.

 – The more senior a team, the more business-orientated it is. A good way to gauge experience levels is to look at ‘Meet the team’ pages and see what percentage senior developers account for.

 – While a project might need multiple developers input, it’s a good idea to choose a vendor who will assign developers to one project at a time. Not only will the sense of ownership help increase a developer’s output, but means each project has one firm point-of-contact.

 – Any software development company worth it’s weight will help a client see past the ‘now’ with any technical requirements, and offer the expertise to scale a project up or down as needs and situations change.

 – Developers are in high demand globally, but that shouldn’t mean waiting long periods for projects to get off the ground. At Solidstudio, development can start in a matter of weeks, with the initial planning phase up and running in a matter of days.

 – A quality software development company will stay in regular contact with clients for a project’s entirety. At Solidstudio, weekly and biweekly calls are standard practise. Clients are also invited to join internal communication channels and are welcome to dial into daily standups if they so wish.

 – The last but one of the most important considerations of all. A quality software development company will be completely transparent at every stage of a project’s progression. From planning and implementation, to costs and potential issues, any work completed should be visible to the client, at any point. Be wary of talk of or signs of further outsourcing from within the vendor – this is also a major red flag.

Software development outsourcing: How much should it cost?

So now you know what to look for in an outsourcing software development company, the next big question is how much should it cost? Giving an exact figure here is almost impossible for two main reasons; firstly, because every project will have different requirements. And secondly, creating a digital product is a process of constant change, and therefore an estimate provided at initial contact stages could easily change (sometimes significantly) as the project evolves.

In order to get a realistic estimate, the best first step is to spend a good amount of time considering what your product requirements are and drawing it up into a project specification document. This should broadly outline how the required software should function, in both the short and long term, which will help vendors understand what level of work and seniority is required. It will also help avoid any misunderstandings in the development cycle and costly delays.

After sharing this document and an initial consultation with your chosen vendor before any work is carried out, you should expect an estimate based on an initial assessment of how much work is involved and the level of seniority it will require. Solidstudio has a track record of smaller end-to-end software development projects over a three-month period, as well as bigger, on-going projects and so can quickly offer very accurate initial estimates. These would include costs for:

It is worth reiterating costs can (and almost certainly will) change as a project evolves. Be wary of low estimates, cheaper estimates don’t necessarily offer the best value, and can often include hidden costs that soon add up. Reputable software development outsourcing companies will be completely transparent when it comes to costs, keeping clients abreast of any changes, and ensuring to check before undertaking new work that might add to the bill.

 is often best suited to IT outsourcing. This pricing method means fees are configured based on the amount of time spent on a project, combined with the cost of the effort (materials) used in the process. Solidstudio works to an hourly rate structure of $40-75, depending on the level of seniority required, with management overlay kept to a minimum.

For more information on software development outsourcing, or for an estimate, contact the Solidstudio team!

True cost of outsourcing - how can you meassure this? Read our article to find out.

Software development outsourcing: what to consider and how much does it cost?

T&M contract in IT outsourcing: How it works

The ever-evolving nature of software development can often make setting a fixed price for work impossible. Much like the IT products being developed, pricing models need to offer a high level of flexibility for if and when requirements change. This is the main reason time and materials contracts have risen in popularity in recent years. Often referred to as T&M, a time and materials contract model works out the overall cost of a project based on the time spent on the work carried out, plus any materials used.

But how does that translate in the world of IT outsourcing? In this article, we take a close look at exactly how a time and materials contract works, plus what types of projects it is best suited to.

Time & Materials contract: How does it work?

A time and materials contract is based on the number of hours a developer spends on a project (according to a pre-arranged hourly rate), plus any materials (eg software licenses) used for the duration of said work.

The key to a time and materials contract is flexibility – it can evolve alongside a project, and easily be adjusted as and when requirements change. The level of control this type of agreement offers to both clients and vendors is what makes it such an appealing option.

A highly agile-orientated workflow, time and materials contracts can be hugely beneficial, ensuring cost-efficiency, transparency, and timely delivery of the task in hand. However, this type of agreement requires a level of trust from both parties in order for it to work successfully. Vendors must be transparent when it comes to time spent on a project and regularly update clients with costs incurred, and clients must always be present to discuss requirements and approve decisions, as well as pay the agreed rate. Needless to say, picking the 

In practise, a T&M contract will include milestones of product delivery, all of which are defined and agreed by both parties. Here’s how a time and materials model works at Solidstudio:

The size of the project is initially assessed, before being broken down into small deliverables, each of which will be estimated and carried out subject to a client’s approval.

Developers, UX designer and Project Managers at Solidstudio work at fixed hourly rates of between $40-75, based on their level of expertise, skills and qualifications. Staff best suited are assigned to a project, with the hourly rate communicated to the client before any work is undertaken. Each month, a worklog and invoice according to the specific developer’s hourly rate is sent to the client.

Solidstudio works in agile iterations of two weeks, presenting progress to clients at the end of each iteration. In addition to this, the Solidstudio team also hosts recurring planning sessions with clients to track and measure performance.

Time & Materials contract: When should it be used?

While it might seem like a time and materials contract is the perfect pricing model, it’s not always the best solution. As a general rule, time and materials contracts are most suited to projects, where the scope of the project is initially hard to define or can be subjected to a change. T&M is perfect for when there is no clearly finalized product, and when there is no easy way to divide the project into smaller parts. This contract type lends itself in particular to:

Projects with undetermined or vague specifications

Start-up businesses, with no exact, predefined goal

Projects that need to quickly react to market trends

Outsourcing a development team to work side by side with the internal IT department

Whatever software development you might require, it’s always best to check all pricing options available. For more information on time and materials contracts and how they work, contact the Solidstudio team.

Pros and cons of Time & material vs fixed price contracts.

Everything you need to know about AI in FinTech

15 JULY 2019 • 8 MIN READ