In this blog, let’s explore how fintech risks have evolved over the last two decades. Also, discussed practical ways to stay ahead of the next wave of threats.
Overview of Risk Evolution
The fintech industry is moving faster than ever. Technology is evolving every quarter, and so are the risks that come with it. Over the last two decades, fintech has grown from a niche service into a key part of global finance, and each stage brought different risks that shaped today’s landscape.
In the late 2000s, when fintech started gaining momentum, regulation and trust were the main concerns. By the mid-2010s, cybersecurity, data privacy, and system reliability became the focus. Today, in 2025, the biggest challenges are staying compliant across regions, reducing AI bias, and managing third-party dependencies.
Early Challenges & How Companies Overcame Them
In the early 2000s, fintech mostly meant online payments and digital banking portals. The biggest concern was consumer trust. People were hesitant to store their money or personal details online. Fraud rates were high, and secure payment protocols were still in their infancy.
Fintech firms and payment processors invested heavily in encryption technology, two-factor authentication, and fraud detection systems. PCI DSS (Payment Card Industry Data Security Standard) became a benchmark, forcing companies to meet baseline security requirements. Regulators slowly caught up, creating frameworks for digital financial services, which helped bring legitimacy to the space. Trust was built slowly through transparent security measures, open communication, and partnerships with established banks.
The Key Risks in 2025
Fast forward to today, and fintech is no longer a niche. It powers everything from cross-border payments to embedded lending, neobanks, and crypto assets. With this growth comes new risks:
- Regulatory Fragmentation
Companies now operate across multiple countries, each with its own rules around data protection, digital assets, and consumer rights. Non-compliance can result in heavy fines and reputational damage.
Solution: Building strong compliance teams, leveraging regulatory technology (RegTech), and engaging with local regulators early can help reduce exposure. - AI Bias and Model Risk
AI now drives credit scoring, fraud detection, and personalised recommendations. If models are trained on biased data, they can unintentionally discriminate against certain customer groups.
Solution: Companies must adopt explainable AI, run regular model audits, and involve cross-functional teams (compliance, ethics, data science) in the risk review process. - Third-Party Dependency
Most fintech companies rely on cloud services, payment gateways, and external data providers. A single outage or breach at a third-party vendor can disrupt operations.
Solution: Conduct regular vendor risk assessments, implement redundancy plans, and build internal contingencies where possible. - Cybersecurity at Scale
Cybercriminals have become more sophisticated, using AI-driven attacks and exploiting API vulnerabilities.
Solution: Moving towards zero-trust architecture, continuous security monitoring, and proactive threat intelligence sharing across the industry.
Shifts to Prepare For
Looking ahead, fintech will face challenges that go beyond what we see today:
- Quantum Computing Threats
As quantum computing advances, current encryption standards could become obsolete. Companies must prepare for post-quantum cryptography now, not later. - AI-Generated Fraud
Deepfakes and synthetic identities will make fraud detection harder. Risk models will need to detect not just unusual transactions but also the authenticity of the actors behind them. - Systemic Risk from Hyper-Connectivity
As open banking and embedded finance deepen interconnections between players, a failure in one system could ripple through the ecosystem. Stress testing and scenario planning will become critical. For example: economic downturns, market events, cybersecurity breaches, natural disasters, and more. - Sustainability and ESG Risk
Regulators may soon require fintech companies to disclose their environmental impact and manage ESG risks. Firms will need robust reporting mechanisms and strategies to stay compliant.
Building a Smarter Risk Strategy
Managing risk is no longer about putting out fires as they happen. The smarter way is proactive risk intelligence, which involves anticipating issues, preparing response plans, and embedding risk awareness into company culture.
Here’s what forward-thinking fintech firms are doing:
- Investing in real-time risk analytics to spot vulnerabilities before they become crises.
- Setting up cross-functional risk committees involving compliance, tech, product, and operations.
- Building regulatory engagement strategies to stay ahead of changing rules.
- Running regular resilience drills to test how quickly they can recover from a breach, outage, or data incident.
Fintech today is about being prepared, not just reacting. The most successful companies are the ones building resilience into their operations, technology, and compliance processes now, before challenges escalate.
Want to strengthen your approach? Contact us at info@anankai.com to explore how we can help you stay ready for what’s next.