Inside The Hidden Challenges Of Fintech Software Development

Alex: Hello everybody and welcome to the Curiosity Code podcast. As usual, I'm your host, Alex, and today I'm joined by Hanif Najad. He's a co founder of NECO Solutions. It's a fintech software company building tools for neo banking, wealth management and trading. And today we'll be exploring the big challenges of software development in fintech. From balancing innovation with regulations to building technology people can truly trust. And I'm truly excited about this particular episode because guess what, I'm in the same boat as Hanif. So I'm really looking forward to this conversation. Welcome to the show, Hanif.

Hanif: I'm happy to be here.

Alex: All right, let's start to talk about software development. So you've worked across various aspects of fintech wealth management, robo advisory trading, before you founded Nyqua Solutions. Can you walk me through your journey? What personal experiences or high moments push you to build your own company in fintech?

Hanif: I think I was kind of lucky to get introduced to fintech early on in my career. I had like a couple of years of experience in E commerce before that. I was living in Dubai back then and then I happened to like go to Poland surprisingly enough. And I met this company called Empirica which was active with building fintech software solutions, mainly like specialized in trading, investments, robo advisory, wealth management and high frequency trading. I was like, I was like there early on and then it was, it was 2016 and since then I've been in fintech. I haven't like even thought of like moving away to a different sector. I don't think like I had like an aha moment for setting up NECO Solutions. It was just a natural course of action for me. I was like mainly like working in project management and product management. So I think like pretty much everyone who's in that like seed fantasizes like building their own products and like, you know, having their own company, you know. So I think like I had the ambitions as well like everyone else like in that doing like product management, project management. That's how it started. So I had kind of like fantasized it a little bit. But then it just like happened that like I, I came to Portugal and I had a couple of project offers to take on and I spoke with my Polish partner And we decided to set up Neko Solutions. We didn't want to be a massive software house that takes as many projects as they could. That wasn't the idea initially. We wanted to always be a product company. So we did a couple of projects in blockchain, in crypto and he also had two, two very exclusive products that we focused on. One was like an antenna and one was with our, one of our partners. So these two products are rather like you know the main focus for us. One of the, one of them is like a very like stealth internal product that we are thinking like to launch. And we've been working on it but it hasn't been like our main focus. It's around personal finance. And the second and the main product that we have been like putting almost 100% of our focus in the past like few years is called Options Robot. It's an automated position management platform for options trader in the US and that product has been launched like for around a year. And it's a product that we care a lot for. To be honest, I'm very proud of this product as well. So to, to answer your question, I don't think we had an aha moment. It was just like everything happened to.

Alex: P.

Hanif: In this journey.

Alex: So when you were in Poland, what kind of markets were you exposed to? Or it was also work with global players in the financial services world.

Hanif: Yeah, so we had a variety of clients that we were working with for Warsaw Stock Exchange that we were building like high frequency market making platform to banks that wanted to use like trading software solutions, working with banks, working with the smaller fintechs that needed help development of their, you know, fintech logic. You know in the backend. We also like at Empirico built a Robo Advisor solution. It was a white label Robo advisor solution which was tailored to ING Varner. I was like early on the product owner of that product which I think is one of the most important and joyful journeys projects that I have taken.

Alex: Nice. So you had quite a diverse exposure to different problems that exist in the market before you actually start building software for your clients.

Hanif: Yeah, absolutely. Like there are a lot of challenges that we had to deal with, you know because we were a company of like maybe 30 some people. And if you think about it as a startup it's kind of big. But if you think about it as a company that wants to serve banks is quite small, you know. So we had a lot of challenges that we had to kind of like you know, deal with in terms of like Placing oursel like in the, in the market. And when the early hypes, the first like wave from 2017 to 2019 that like the price of bitcoin hit like, you know, 67K. I think like that wave, you know, also kind of like woke us up with that. There's a huge market there. So we have like to also kind of like just like all of the projects that we had tailored for graphi to working with API protocols for banks or stock markets or brokers or custodians, everything could be adjusted to the credible world as well. So that was also a massive wake up call for us. Challenges that we had to deal with. When you're living those moments, you're like, I want this to be over and I want us to be successful and I want us to get this project and I want us to get this back. But when you look back right now it's like, okay, it was fun, you know, doing all this. It was fun like you know, staying in the office for like 15 hours, you know, because the next day we have like a meeting with the bank, you know, so you just want to make everything like as perfect as possible. So yeah, there were a lot of challenges in that time.

Alex: So your domain where you deliver products is a little bit different from where I operate. And I think that domain is heavily driven by regulations. And I'm interested to hear your perspective on how regulatory pressure and aspects like data sensitivity and user trust, they actually reshape the way developers built and ship products in finance.

Hanif: Regulatory is usually scary, like if you come from tech background, you know, if you're like coming from legal and you know, like law background, then it's a little bit like, okay, you understand like the concepts better. Considering we were coming from a technical background, for us it was a bit of like a monster to face. And we had to face that monster like at the end of the day. So of course we had to go down that rabbit hole and understand every aspect of the regulatory requirement that was required for our products. At the end of the day, I think the transparency and stability of regulators, it's so important for products that are compliance heavy like in trading and investment world. I always hated European regulators because they just expected too much, always. And the set of requirements that they would give you would kill innovation. You know, it was like always like, I don't know, like MiFID 2 that we had to like comply with for like one of our few of our trading products or investment products. It always had like a lot of questionnaires that you have to ask, like, the user. So it's a lot of time consuming for you as a vendor to build and it's a lot of like, it's, it's very time consuming for end users to go through it in order for your services to be compliant. Right. It just kills, like, innovation, you know, it just kills the whole onboarding journey. You know, I always like, hated like complying with European requirements and I always love the American ones because, like, it was always like very straightforward, it was quick. You know, you kind of like assume a little bit that the person who's onboarding understands what they're doing, you know, which I think like 90% of the people do, you know, they understand the kind of risks they're getting involved with because at the end of the day it's their funds that is going to be at risk. Right? So it was always like, easier to like comply with their requirements, but credit to EU with the mica. For mica, recent like crypto regulatory requirements and guidelines, things were a lot better because the US didn't have like a universal regulatory requirement for like crypto that time. And EU kind of like, you know, released this like, regulatory requirement for crypto activities. And we were like, okay, for one slide, you know, you're kind of like took first step. But now, like with the genius act in the U.S. also, like, they have a very clear, like, guideline. But there was this sort of like a year and a half, two years, like, gap between like, you know, when EU released that requirements and then us coming up with their own requirements. And during that time, I know like a lot of companies like went down in the US because they couldn't kind of like operate like in a, in a very like, you know, healthy environment because they didn't know what was coming. Right. And if you're like a small company company, if you're like challenged with what is going to be my regulatory requirements. And then if you're not super well funded, you know, you'll drop. You'll drop, you know. So I think, like, I'm not sure if like the regulators understand like how big of a role they played, like for smaller, like fintech companies, but they do a massive, like they have like a massive role. I don't know if they would hear this. Just please be transparent, understand us. Don't expect too much once the requirements are too long and too heavy to implement and for the end user to go through. It just kills innovation, it just kills onboarding.

Alex: How do you personally navigate that? Do you have a Dedicated person on your team who is dealing exclusively with regulations, where you have external consultants or, I don't know, it's AI. How do you deal with that?

Hanif: I think I like to understand it myself best, you know, so I have to like, go through like the complete requirements. And once you kind of like go through like the compliance process procedure like a few times, then you kind of like get a better grasp of like what you need to do because you get familiar with the clauses and what sort of requirements and what should be like the imputation of like those clauses. So I like to understand it myself first, such as, you know, kind of like, you know, shut the door, print it on a paper, you know, get my markers, you know, just get at it, you know, see like, you know, what do we need to like what? Because usually like this requirements are like, you know, 100 pages, but then at the end of the day you need to know like five pages, you know, but you need to like identify what do I need to comply with. Right, so you need to understand it first myself. But once you do that, you know, you create like a set of requirements. You speak with legal consultant that is, you know, familiar with and have done like that set of requirements that you need to apply to your products. And then you have to kind of like, you know, do the cross checking. You know, it usually helps if there's a sandbox. I think like the FCA in the UK has done a very good job of creating sandboxes for fintechs, especially in the trading and investment scene, that you go through like the compliance procedure, you implement what is required for you to implement, right? You put it on this regulatory sandbox and then they have a team of people that would go through their product and say, okay, if what you have done is good or not, and then they would give you. So you don't actually go to the market and then they would come and write you a fine. And that has happened in the US a lot. Like, you know, some, some big firms got like some big checks, you know, big fines for not being compliant, like, you know, as what the SEC or FINRA required them to be. You know, So I think like, you know, that sandbox really does help, you know, but again, like, you know, it's been done many times. So there are like people who have done it as well, like the legal specialties that have done it as well. So. Yeah, so first they don't work, you know, implement and then have someone like review it for you.

Alex: What I'm curious about is that you're a co founder. Right. So there, there is another co founder. So there are two of you, right? Or more.

Hanif: Yes, yes, yes, there's two of us.

Alex: From your perspective, how having a co founder helps to, you know, navigate all the variety of challenges you're facing. Because you know, you just mentioned that. Okay, I have to actually figure out the legislations and compliance side by myself, which you know, I'm just putting myself in your shoes. Like man, it's like it's a. You have to deal with so many things in business and now also, you know, you have to really be into the compliance things. Tell me more about the how your co founding relationship work out.

Hanif: First of all, nobody tells you like this is going to be like the life you will have as a co founder. You know, when you're starting up, when you're setting up a company, at the end of the day like a, I think Swiss army knife, you know, you have to do like multiple things and you need to be able to do multiple things. So that's just like the life of the life for us. But the interesting thing about like my co founder who was like my friend for like many years before becoming a co founder, he does operate like in different areas that to be honest, like I'm very thankful that he does in those areas. When it comes to operational efficiency that we need to have in order to move the company forward, it's not only product, it's not only compliance and it's not only launching of the product, it's operating the company that I think is the most important element. And thankfully Thomas does this very well as well as dealing with our team, you know, making sure that, you know, they're good. You know, I think I sometimes kind of like skip over those human elements of like running a company and I think it does a very good job of like knowing and understanding who's not happy, you know, and why they're not happy, you know, finding out why they're not happy. So I think it's a great corporation. Great, like fit. I'm really thankful for having him.

Alex: And you are more on the technical side, right. So you can focus on technology and regulations and how it fits together and how to build the product that actually.

Hanif: Exactly, yes.

Alex: Let's talk about the actual cases that you guys worked on. So I see here in my notes that you helped design a white label robo advisor that was acquired by ing.

Hanif: Yes.

Alex: So I'd like to talk about that case. I'm curious about what are the hardest technical or design problems behind the scene. And what did that experience teach you about scaling financial products? Because you know, if it's a white label product, it's definitely and then acquired. So it's definitely a question of scale in the game as well.

Hanif: I think like to be honest, like technically and design wise, like we had such a good team and like it took us like maybe around eight to 10 months to have like a product that was well ahead of like the competitors in the market. Of course, like you know, going through like the proper design process to understand who will be using that product and why they will be using it and what sort of like features do you have to like implement? Because when it comes to like white labeling like products, you get to meet like a lot of prospects and they would have like different demands from the product. You know, I want like the transaction history to be like shown this way and need to have that filter. But like another wealth management firm does not focus on that at all. They just want to have like, you know, a different, I don't know, like portfolio like logic, construction logic. Right. It's very difficult to like give everybody everything they want. Right. And you have to give the clients you're working with what they want because otherwise like why would they be buying your software? So for us build this scope of a product that would fit everybody. It was the challenge. So I think the scope was the main challenge of that product, not the technical ability to build it. Because we had a team that was already implementing high frequency trading solution. Right. Or when it comes to scalability, like we already had like you know, platforms that were like processing like you know, orders like in milliseconds and many of those orders in milliseconds, you know. So like having like that team, it wasn't like a problem like that we faced, but adjusting to clients potential like prospects, demands and requirements was the main challenge. Right. The process of I think signing the contract with the bank was the most difficult part of that project. So we had like what they wanted.

Alex: You mean signing the contract with who with first customers or during the ING.

Hanif: Bank with our energy bank.

Alex: Okay.

Hanif: So yeah, the product was what they wanted and we made sure of that. And you know we had like a few iterations of like adjusting the product for. Exactly. It was this process of actually like making sure that the product integrates with the internal systems. Right. And you go through like the, like a very like never lasting form of like, I don't know, like details about the security of the software, like the sort of tokens the software use, the sort of like, I don't know, like stack that we have in the product, you know, use kind of libraries, using. Who's like in charge of who wrote this? Like, it was just like, like six months of that, you know. And when you are like, you know, startup like operating, that's that six months can be like very dangerous, right? It can be like a, you know, like life or death sort of like situation, you know, for you. So this, this I think like was the most challenging part of the product, you know, that we had of that project that we had was to actually like making sure that the product integrates with the bank. So we knew it's gone. I forgot it would take like two weeks to integrate to the bank. No problem. We had like the technical knowledge, but it was like the bureaucracy of like, you know, having the software introduced to the, to a bank and having it like integrated and having the team that is going to be working on that, you know, integration process. It was just like the back and forth of that was like, it was like very lacking a good word, like annoying, you know, because you already had like the product that they wanted, you know, but then actually like, you know, signing the deal was a little bit like. Yeah.

Alex: I think anyone who is building solutions for those large financial firms, like banks, consultancies and like big players in the market, they've gone through this hassle. I've been there myself and it's. I can totally relate to the pain that you felt, but I don't know, I don't know how to do it in a different way. Do you have any insights like how you could have done it in a different way?

Hanif: I mean, if you're like a small startup and you're just starting off, it's going to be difficult. You have to go through that process. Like how you have experienced it. I have experienced it. And as long as like you're like a small or medium like player in the market, if you're like planning to work with banks or bigger financial institutions, that's going to be the challenge. That's going to be one of the challenges, right, that you have to be patient for. But once you establish like a relationship with one, the first one is going to be the most difficult one, right? Once you establish like a relationship with like a big financial institution or a bank, then that would make it a lot easier for other banks and other financial institutions to choose you. Nobody wants to be the first, right? But once you sealed that first, I think it just becomes much easier. So I think my advice is like Power through, have great resilience, just go through with it. Once you have that first one, think about it like that. Once you have the first one, the second one is going to be much easier. There's never going to be as painful as the first.

Alex: Did you have any certifications back then before you started the process like ISO 271 or SoC2 or something similar to that?

Hanif: Yeah, yeah, so we had those. But the most important ones that they require was like the compliance of the software now with the so their internal.

Alex: Actual compliance review process. Yeah, when I ask the question, I wish there is like a civil bullet. Like hey, you can actually do it like that and then you won't have to go through it. But yeah, it seems like it's not, it's just something that you have to plan for. Right. So when you start the fintech startup that serves that kind of profile of clients, that's probably should be part of the plan. Like hey, you will suffer through like for at least six months till you close the deal. If, if you do everything right, if the product is there.

Hanif: Yeah, we have this like model and that our company say like plan for the worst, hope for the best, you know. So we always like plan for the worst, you know, because we have kind of like gone through that like, you know, those like stages like many times already, you know, so expect that, you know, if you're like doing like a time simulation of like, you know, selling a deal or selling a software or something, just expect like the worst timeline or like the worst offer, you know. So it's always like best to like prepare for those scenarios, you know, and then if something good happens, then okay, take it.

Alex: I'm curious how you approached ING initially. Like any advice like how to even get in touch with such big profiles?

Hanif: I think like they were interested already so they kind of like became to their radar the other way around, you know. So they were kind of like, it was like actually like this was like long time ago, 2017, 18. So you still like there were not as many vendors out there to do what we were doing. Right. And since we're in Poland and it was like their branch, it kind of like, you know, for them it was like, okay, like they're actually going with like a local vendor. That was just like, you know, so.

Alex: That was pre AI kind of era.

Hanif: Yeah, yeah, for sure, for sure. Yeah. Way too free.

Alex: Interesting. When we talked about regulations, you mentioned that European regulations a bit lagging behind the US in adoption. What do you think Europe still gets wrong about User experience in fintech and what is actually finally changing, I think.

Hanif: When they are creating laws, especially for laws that will be applied to, you know, software companies or fintech companies, you know, I don't think they really think as like a fintech innovator or a developer at all. You know, they don't really like take us into account at all. Like, and you can see that from like what they require, you know, because if you have like a minimum of like, okay, I'm creating like this requirement for a trading application, right? So if you're going to like have like any trading products that connects users to trading venues and equity markets, right. If you have such a platform, then you have to ask this 25 questions to make sure that the user understands the kind of risk they're taking. That's a bit over the top. You don't need to ask 25 questions. So they don't really think about it from the, the journey that like those people like us, like who have to build the software or the app, right. Have to create for the users, right? They don't understand like how difficult it is to acquire customers, acquire users. They understand how much cost it has like to acquire to have someone to come to your app. They understand how much costs you have to like, as an innovator, like an innovator usually wants the good of the users. They want like them to have access to like better markets, you know, wider markets, you know, like order, like make orders like investments systematically, you know, have like, you know, a better sort of like financial education, understand markets better and execute in the market. At the end of the day you are providing values, right? Because if you have to ask like repetitively, like, do you understand ETFs? What do you understand about ETFs? Like, how much is your experience on ETFs? And a lot of these questions were like, a lot of people just skip through, you know, I don't think they want to admit, but they do. That's the reality of it. They just skip through it. You know, if you just kind of like, you know, create like, you know, a concentrated version. Right. But they ask like more of like, I don't know, like a fun behavioral questions, you know, because you're getting like a subjective answer anyway. Yeah. You're providing like objective options for the user to select from, you know, but at the end of the day like a lot of people are just like skipping through it and if you ask them a question, they cannot answer the same question, you know, so they, because they're Just like, you know, thinking like what should I like answer right now to skip through this like question so I can see like what the app like gives me. Right. So I think I didn't really understand that part. And they come like from this sort of like legacy mindset.

Alex: It sounds like it's an infinite loop in a way of struggle. Because if you want to innovate, in most cases the innovation would come from smaller innovators like startups. Startups, they have limited funding, usually very limited. Yeah, rare cases when you have, you know, Runway long enough that you can experiment and do whatever you want, you usually under very big pressure to get things done and start being cash positive as soon as possible. So you're doing the innovation and suddenly you're facing the wall of acquisition because you have to follow the regulations. So then your innovation is killed. So it means that the only place where you can actually innovate is the old fashioned large institutions, well funded, that have lots of resources, they can do that. So it sounds to me it's like the regulations are written more for those large corporations that historically in any industry doesn't matter whether it's financial services or manufacturing or you name it, those large corporations, they rarely bring innovation. They usually because of their size and because of bureaucracy that we already discussed, usually very, very slow. So it sounds to me like that's an infinite problem that they like facing over and over again. But I'm wondering, so from your perspective, are we talking about European challenge or us facing the same problems in your.

Hanif: No, I think like in US is a lot easier to go through. Like, you know, like the questionnaire required to understand and assess like the risk profile of a user, you know, it's a lot more straightforward. You have more room to innovate. Short charts, you know, like, like understand the risk, you know, like if you invest like this much, you know, and if you lose like that amount, like are you comfortable with like, you know, losing this amount? Because this is a potential risk of like the sort of like portfolio that has been selected for you. So it's, it's a lot more interactive. It's like a set of guidelines that has been given to you and then you kind of can implement it in a way that you could have some elements of innovation and creativity. You kind of make the UI more interactive. Whereas in the eu, just basic questions.

Alex: So for me it sounds like a sad reality for startups. If you want to survive with higher chances, your go to market has to be us, at least initially.

Hanif: Yeah, I mean that's good insight. Yeah, it's not possible for everybody to do that. So a lot of I think fintech apps in the eu, they're just facing it. They're just facing it. And the thing is once you start providing US markets, then you also have. Okay, you're like. Because everybody wants to invest in the US markets, right? You have like the Max 7 that are just doing. They're killing it. Right. And everybody wants a share of that, right? A share of that success, right?

Alex: Yeah. So the competition is very, very tough.

Hanif: Yeah. In the US like the market, it's a lot more mature than like in the European countries. I think like there are like many reasons why they're like a lot more ahead than the European markets. I think the pension system is the most important one in my opinion because like in the US like you are in charge of your retirement, you know, you just have to get in there, you know, like create your Roth ira, you know, put money in it like from early days, you know, and it's just like embedded into like the system, embedded into like the employment contract. It's just embedded in the whole country. Right. Whereas in the eu like you have like a pension retirement system that is sovereign based, you know, and you get something, you know, like not a lot, but there's something, you know, that you're getting paid for so you won't be hungry, you know. So that's why like people don't really think investments or trading like early on that's changing for sure because life is a lot more expensive than it used to be. So a lot of people want to have ways to also grow what they have. Even though I think a lot of times people don't really understand because they always associate investments with positive returns. Due to the last 10 years, years of like bull market that we have had, everything just keeps on going up. Nobody experiences any losses, you know, so everybody's just like going up, you know, so that's that it's just like almost like understood as like a secure profit, you know, on your, on your money. And I think people like really understand like markets can fall, you know, and they do fall, like that's inevitable, it's going to happen, you know. So I think a lot of people like in Europe have like problems like understanding that because it's a new generation that is interested in investment and trading and they haven't experienced a massive drawdown in the market yet. And it's going to happen. There's nobody can teach you that. Just have your portfolio diversify and be in it as long as you can. That's the game, right? Be in it as long as you can.

Alex: We're getting closer to the end of this conversation and I really want to get your take into what's happening with AI and you know, in the domain that you built products in. So you know, AI models become more accessible and we see AI implementation here and there and different shapes and forms, automation. How do you think it's reshaping the relationship between human advisors, algorithms and clients.

Hanif: When it comes to like financial advice? That has been like the discussion before the release of GPT that like okay, like there are computer models that could do as good of a job as like financial advisor can do because you just implement the construction like portfolio construction logic. They have you just code it. It's intelligent, it's not artificial intelligence, but it's just intelligence. It understands like the ways of like your profile, you know. So this has been the topic, you know, for some time already. Like we had like betterment and Wealthfront in the US which are like robo advisors, you know, and they do what? Robo advisors. So advisors are kind of like used to this. I think AI is actually a good thing for them because they can just process a lot better, you know, a lot more. Because like the customers that wanted to stick with the human advisors, stuck with the human advisors because they had already a lot of options to like move to like a digital financial advisors already, you know, before AI. So I think like it doesn't really like influence them as much yet. And I think when it comes to like having AI models to decide on behalf of retail clients, we just don't have like a regulatory framework for those, you know, it needs to go through a lot of like testing phases, you know, you can of course like build your own personal model, right? You build like something for yourself. Diy. I want like this AI model like to understand like the market for me and then like I'll give me some logic and then you would just invest on behalf of me, right? You cannot have this correction done for retail comments as of now, you know. So if you're like, you know, launching something like digital, it has to be like the logic has to disappear for the regulators to audit. Right? So you cannot just have like a black box, black magic box, you know, that which decides, you know, and nobody can understand it or question it, you know. So I don't think financial advices yet threatened by AI yet, but software developers.

Alex: Because it's protected by regulations.

Hanif: Yeah, but software developers for sure are. And I Think we just use a lot of AI right now.

Alex: Right, let's wrap it up. It's been quite a fascinating conversation. I really appreciate it. And before we finish, I'd like to get your take on cultural aspects and mindset for teams to succeed in fintech and build long term trustworthy products.

Hanif: I think like, there's no right or wrong answer to this because there are like so many different ways that I have seen at least like people like build teams the most is to build cross disciplinary teams, you know, and have them like interact with each other. You know, once you have like. I don't like from the topics that we discussed, like designers, you know, with the developer, but the legal team, you know, and like the business analysts, you know, like working in the same sort of like environment. You know, nobody thinks like their job is the most important or the job is most difficult because they kind of like interact with each other in a, you know, in a, in a very like detailed manner. And I think that just builds like empathy in the team. And I think that's important that people think like they're on the same boat. So for me, like to, to kind of like have the team to think they're in the same boat is to have like those multidisciplinary team members and then working in a project. And for me it's also accountability is very important. You know, I cannot work with people who are not accountable for the task or for the work that they're doing. You know, you have to be like in charge and get it done. You know.

Alex: Are you guys remote or you have office here in Portugal?

Hanif: No, we have an office, but it's just me going to the office. But we're across like Europe right now.

Alex: Nice, nice. Hayf, thank you very much for your time. As I said before, it's been a great conversation. Really appreciate it. Learned quite a bit of things from this. Thank you. Yeah, it was a pleasure for the listeners as usual. If you watching this YouTube, don't forget to hit the like button. Subscribe to the channel. If you are listening to this on any podcast platform, don't forget to subscribe and leave a comment and see you in the next episodes. Bye Bye.