Are you planning to start your own Fintech start-up? Here’s everything you should consider to be smart with how you do it.
Finance and technology are two major industries that have been doing great on their own for a very long time. Can you imagine the possibilities these two can achieve when they team up? Well, some businesses did, and only a few years ago, a new industry vertical, Fintech, was gaining traction.
Traditional banks have been around for centuries and became the entities with a monopoly on financial services until Fintech came into the scene, and banks became an old concept that needs a significant upgrade to modern day’s trends and needs.
Today, “fintech” is a buzzword all over the media, encouraging aspiring entrepreneurs to believe that they can simply start a business based on the trend. Yet, as with any endeavour, this isn’t really the case. New companies, especially in emerging sectors like Fintech, require a lot of planning and careful thought if you want to get it right the first time and avoid the fail-and-try again method.
Here are the key things you should consider before you launch your fintech start-up.
Understand regulations
Like in every other industry, the financial services sector also has many regulations, which, like it or not, might actually be the reason why this industry is so tough to break into.
It makes sense that the fintech sector needed laws to safeguard financial systems and users from abuse. Yet, when you are on the other side of the fence, and you are the one offering the services, not using them, you’ll have to struggle with a huge amount of compliance. In fact, you should consider help from a lawyer and an accountant to get through this step.
Moreover, these regulations may also vary depending on the state, country, or region you want to launch your fintech start-up. So, you’ll need to know and fully understand the regulations and comply with whatever the area you are in demands.
Identify your competition
Although 66.7% of senior banking executives agree that non-traditional financial companies will have a significant impact on wallets and mobile payments globally, make no mistake, banks don’t just accept defeat and step aside for new players.
Traditional financial services providers have acknowledged the disruption the fintech sector has created for their business but won’t make room for new fintech players without a fight. Plus, remember that these traditional players still hold the assets, and many of them even have the power to partner up with fintech players or even buy their companies. Take Bank of America, for example, which has invested $1.5 million in fintech efforts in Charlotte, N.C. also, in Europe, Santander has started a fund to develop fintech companies.
So, you’ll have two options here: you either take on the big players or you explore partnering opportunities with them.
As the market research experts from Sapio Research explain “You first need to identify your competitors, both traditional banks and fintech companies, through market research methods. Next, you need to see which of them will make a good partner and which of them you should simply avoid picking on.”
Build customer trust
The financial industry has a very complicated relationship with customer trust. Now, when you add technology to the equation, another sector that people don’t trust that much in terms of privacy and security, building customer trust is a challenge, yet imperative.
When launching a fintech start-up, security must come to the forefront of your business. Keep in mind that you’ll be handling very sensitive data about your customers, and security issues such as data breaches or cyberattacks could be the end of your business if you fail to protect your customers’ data.
Considering the nature of the data fintech companies manage, they are an optimal target for hackers. And, make no mistake, cybercriminals target both small and large companies, so don’t think that they will never think of targeting your data.
Apart from the security risks that exist, you also need to work twice as harder than traditional banks or fintech players that have been on the market for a long time now to build customer trust. Many will be sceptical about new services or financial services providers. So, do your best to let potential customers know that you take security and privacy very seriously by putting safeguards in place.
Find a strong team
This one might seem really obvious. Every business needs a team of competent employees to attract and keep customers happy.
Yet, keep in mind that you are entering an emerging sector that is putting a lot of challenges in your way, from big competitors to sceptical customers and strict regulations. Apart from that, the nature of your business requires both business and technological expertise to function perfectly.
So, you’ll need a strong team that has skills and competence in various areas, from technology to business, finances, and customer service.
Be unique
Although an emerging industry, the fintech sector is rapidly getting crowded, as many new ventures are breaking into it. So, a critical entrepreneurial question to ask yourself is whether or not your start-up can offer something unique to set it apart.
You’re already fighting for customers with big traditional players, and now the market is also getting busy with fintech players just like you. So, you must really do something different, good different, if you want to make your business stand out.
Be as technology savvy as possible
By its nature, Fintech is an industry that involves a lot of technology. And, we aren’t just talking about making online payments with your smartphone. You need to understand really specific concepts such as machine learning, blockchain, AI, distributed ledgers, or big data to know how your business functions.
Take Bitcoin, for example. The cryptocurrency is powered by blockchain technology. And, today, cryptocurrencies are also arguably the biggest threat to traditional banking, so, a threat to some of your competitors. Thus, how could you be better than them and set your business apart if you don’t understand how technology is powering your business?
So, be prepared to know and fully understand the technology behind Fintech. Plus, as technology is a fast-evolving field, be ready also quickly to learn and adapt to new technologies for your business.
