How to Start a FinTech Company
FinTech was all the rage in 2019, so I believe there is no need to explain or elaborate more on it. But still, if you were by any chance living under a rock for the past couple of years and are unaware of the miracles of FinTech, I’ll give you a brief idea.
FinTech is the amalgamation of the two words: Finance and Technology. Simple, right?
Well actually, not that simple. It is probably the ultimate invention in the banking and finance sector since compound interest. If you think that digitization of banks was a decision made by those institutes for the betterment of customers, then you only know half the stories.
The modern form of banks that we see today have been around for easily more than a hundred years. But their old ways were challenged when new startups began to offer bank-like services to people at low or no cost and completely digital.
Banks had to upgrade their old ways, or they would have been obsolete. They’ve survived the first wave, let’s see what happens next.
Key FinTech Statistics for 2019-2020
- In 2019, 64% of consumers worldwide have used one or more FinTech platforms, up from 33% in 2017.
- 96% of global consumers know at least one FinTech service.
- Digital payment reached $4.1 trillion, in the first half of 2019 alone.
- Mobile payment services process an average of $1 billion worth of transactions every day.
- There are over 2,300 active cryptocurrencies in the world.
- The biggest cryptocurrency in volume is Bitcoin with the close second being Ethereum.
- The biggest market for consumer adoption of FinTech is in China (87%) while the lowest is Japan (34%).
- The FinTech adoption rate in the United States is 46%.
The Philosophy of FinTech Startups
They are challenged to outperform the existing financial institutes, their contemporary rivals, and themselves and leave our comfort zones to be able to realize our full potential.
The motto seems to be that it is their responsibility to bring the much-needed change, and the companies that don’t do it themselves will have others do it instead. An advancement is no longer an option, but a need.
What’s the Next Big Thing in FinTech?
Incidental on the wordplay, the next “big” thing in FinTech is BigTech. Just like FinTech mixes (Finance and Technology), BigTech unites Big and Technology. What t means is that its the amalgamation of the biggest Tech enterprises in the world.
Even though BigTech includes several companies, the biggest ones have been branded as GAFA (Google, Amazon, Facebook, and Apple).
The other top companies that are part of the new trend are enterprises like Paypal, Samsung, Microsoft, Baidu, Alibaba, Tencent, among many others.
The difference between BigTechs and FinTechs is mainly related to capital, more advanced technology and most importantly, worldwide presence.
All these companies are more than equipped to directly face the biggest Banks in the world and offer their clients all kinds of financial products competing against these banks.
Big data is the most powerful weapon in their arsenal as big data can help them understand their customers and their needs in such detail that banks could never before. If information is gold, then these companies own the federal reserve.
Enough with the chit chat, now let’s talk what we are here for.
How to Start a FinTech Company
There are 9 things every startup owner should know before starting your own FinTech company.
1. Identify your niche
The first step to start any company, let alone a FinTech company is to find the right niche. FinTech is a vast industry with several successful verticals. You must be crystal clear of the target market and the problem you are looking to address and solve using the power and possibilities of FinTech.
After choosing your niche in the domain, you also have to decide what specific audience will you cater to; for instance, people from a particular country, state, city or a specific age group, or demographic.
It's always advisable to launch your startup locally first and expand to the global market as you grow.
Here are the most promising niches of FinTech for 2020:
- Trading & Investments
- Financial Products for Small Business
- Payments and International Money Transfers
- Data Analysis & Financial Decision Making
- Personal Finance Management
- Mobile Banking
- Money Lending
- Cryptocurrencies & Blockchain Solutions
2. What’s Your FinTech Company’s X-Factor?
There is nothing worse for a new startup than to become a “copy” of an existing FinTech company that is doing the same thing and providing the same product.
The best way to have the edge over your competitors is by studying them and finding what they lack. Then work on those factors and provide a better solution than your competitors in your FinTech niche.
News Flash! The FinTech industry is getting crowded, and once the new wave of innovations hits, only the companies with unique and profiting offerings will survive. So, you better be among the ones that not just survives but thrives on change.
3. Know the Rules
Money is the most precious commodity to the majority of people in the world. So, keeping it secure is important for everyone. That is why financial institutes have to follow virtually infinite rules and regulations while dealing with their customers’ money.
Offering similar services; the same regulations bind FinTech startups. So, before starting your own FinTech company, you need to know the ins and outs of the regulatory authorities, laws, legal limitations and requirements of the financial industry.
4. Hire the team
Talented people make a successful enterprise. So, if you wish to become the best FinTech company, you need the best talents at your side. Therefore, hiring top-shelf employees among the crowd is most vital.
FinTech is still in a growing stage, so attracting good employees in a city with a limited talent pool becomes quite tricky. The best decision for a startup in such case would be to hire an offshore software development team.
For up-and-coming startups, the outsourcing option will help in finding specialists with specific domain knowledge or relevant experience, all at a reasonable cost.
5. Choose the Right Tech Stack
An army is only as strong as its resources, and a digital solution as strong as the tech stack used to make it. So, it is must for every fintech company to build a solution using customized software. No decent startup would rely on third-party CMSs and frameworks to handle their transactions.
Remember that with finance, there’s always a risk of a data breach. Therefore, data safety is practically the most critical aspect of Fintech App Development. You need to ensure that your FinTech product (app, website, payment platform) is secure, and all the data used will be encrypted and stored in the cloud.
A ready-made solution can never match the performance capabilities of custom-designed software. So choosing the right custom software tech stack is a must for FinTech companies that plan to succeed.
6. Create an MVP
There is a pretty good chance that you won’t be having the entire funding to build and launch your own FinTech company. That doesn’t mean you have to stop working and forget about your dream. Just go for an MVP.
A Minimum Viable Product (MVP) is a very washed down, the basic version of your FinTech mobile app. In simple terms, MVP is a development technique in which the FinTech app or website will be developed with just enough features to suffice for early usage.
The benefits of MVP is that it is cheaper, quite effective for its purpose, the development process is way fast, and its the perfect proof of concept that investors would love to see from you.
7. Get funded
So all your pre-production work is done. You have the perfect FinTech business idea, a talented team, and a functional MVP; what do you need next? Get the money to build your full-fledged FinTech product and launch your company worldwide.
But how do you do that exactly?
Create an amazing investor presentation, product demo, and business proposition. If all these three factors align, then the stars will be in your favor and their money in your company’s account.
You need to understand that VCs are getting more and more selective in their investment, the competition for funding is snowballing drastically, and only the companies with truly game-changing offerings are what everyone is looking for.
Thus, it is absolutely necessary to make your value proposition the most enticing for your investors.
8. Build Partnership
You may have enough funding and think that there is no need for more partners on the team. But remember, partnering is not always just for monetary funding. What’s better than having a friend in the business? Having two friends in the business. Yes! More the merrier, and better for your business.
One of the main reasons (besides funding) for partnering in the FinTech business is to achieve credibility. FinTech is still a very volatile business domain, so it is hard for users to trust an emerging entity.
So, getting associated with a popular name in the field will help you sail through those hurdles. Another big benefit of partnering in that such financial institutions also bring along a large customer base and potential customer data.
9. Keep Improving & Upgrading
Fintech isn’t the easiest industry to target. It is still growing, and every now and then new features and innovations come to upgrade the industry. So you need to be ready for the change. But remember, if you ride the change the right way, you can be on the top.
It takes time and effort to develop a successful fintech app, and it is only with continuous improvements and new ideas that you can win in this industry vertical.
So, that’s it for this blog. Now you know how to start your own FinTech company. What are you waiting for? Begin your journey and start researching about the various FinTech niches. Remember one thing though; your app will only be as good as the people making it. So, make sure you hire the best FinTech app development company that you can find.