Fintechs: Opportunities and Challenges. New Business Models

Press Release
GDS Modellica
20/08/2022
Unprofitable, neglected gaps in the market have allowed fintechs to consolidate their position in the sector. But these new business models and financial opportunities are not immune from risk
GDS Modellica offers flexible, tailor-made solutions to combat and manage fraud effectively throughout the customer credit cycle for any institution that needs to optimise and automate its processes.
Fintechs today are acquiring increasing economic importance. They have managed to consolidate their position in the financial sector by offering alternative finance solutions, online consumer credit and flexible, convenient and efficient services. Advances in technology across society have led to changes in consumer behaviour, and this, in turn, has led to the emergence of new markets and new business models. As well as satisfying the demands of the modern consumer, fintechs have managed to consolidate their position by catering to a market niche that was, until now, not profitable and largely neglected by traditional financial institutions.

Fully aware of the new needs of the financial sector, GDS Modellica has developed flexible solutions that can help financial companies create, manage and improve their business processes more effectively whilst maintaining compliance in a regulatory environment that is notoriously strict. These solutions can also adapt to the provision of credit and level of prospecting in order to accelerate the commercial cycle using automated decision technology and risk analysis, all whilst maintaining maximum levels of security.

Identity theft and fraudulent transactions represent a real risk for fintechs. Staff errors, unfit internal processes, system failures or external events can all lead to potential operational losses. And then there is a much tougher risk to manage: cybercrime.

According to the recent report by Finnovista titled “Evolution of the Fintech Sector in Latam” (original report in Spanish), disruption in the sector has paved the way for the existence of new verticals in insurance, lending, payments and investments markets, known respectively as Insurtech, Lendingtech, Paytech and Wealthtech, and these will each continue to gain relevance in the industry. One of the catalysts for change in the financial industry are digital loans and Lendingtech companies, companies that provide people and businesses with digital credit solutions.
In Spain, for example, the sector consists of more than 400 companies, of which 70% are Spanish. Some 75% of fintechs in Spain actively collaborate with traditional banks and other companies in the sector. And the sector just keeps growing. According to a study Deusto Formación, in 2020, Spain become the sixth largest market for alternative finance in the world, with annual growth of 15%. According to Finnovating, the reasons for these collaborations reside in the fact that “fintechs have the agility to easily adopt new technology and try out new business models. They are also much closer to the customers of today and tomorrow and can offer much greater flexibility and efficiency”. These companies also enjoy trust and boast high levels of expertise, and with the sort of customer base that smaller companies would take a long time to acquire, it is easy to see how this sector has the potential to have a significant impact on the Spanish economy and access to finance.

However, Antonio García Rouco, managing director of GDS Modellica, believes that “fintechs are not immune from risk, whether it is related to liquidity, legislation, markets, reputation, operations or cybercrime. The most common threats include risks associated with professional financial services, the correct functioning of products, use of personal data and, lastly, day-to-day operational risks”.

As experts in credit risk management, GDS Modellica offers its customers tailor-made technological solutions to help manage risk and develop new business processes. Their solutions cater for the entire customer credit cycle, including prospecting, management, fraud, collections and compliance. Their solutions focus on offering four key components: data analysis, data management, tailor-made risk management tools and an interface that provides a complete view of the customer.
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