The financial industry has been impacted very powerfully by technology in recent years. Fintech is a new buzzword nowadays, representing those companies that are being started by promising new entrepreneurs. Now as with any other startup, fintech companies also require careful thought and planning.
Especially since they are a part of a new emerging industry. This article will help you by listing a few important facts you need to consider before you launch a fintech startup.
It might be tough to break into the financial services industry due to all the regulations associated with it. There is scope for plenty of abuse, so strict laws have been enforced to safeguard the financial systems and to protect it from any abuse. As a result, there is a need to engage efficient lawyers and accountants to deal with compliance issues.
However, as far as fintech is concerned, a gray area exists due to all the new system of handling money that has been ushered in. Especially in the banking sector, there are plenty of new legal issues, and a disruption exists since peer-to-peer lending is operated by new models. If you are an entrepreneur starting a new crypto fintech, you need to hire the top crypto lawyer firm to stay on top of all the legal ramifications of starting and running your new company.
Competition From Other Institutions
Since there are now new methods of how banking is done, banks do acknowledge that disruption has been created by the fintechs. Banks still own the assets, so they can partner up or buy out fintech companies. Many of the big banking institutions are funding to start fintech companies or raising their stakes in fintech startups. So, as a startup, you need to decide if you have the determination to take on these big guys and stand on your own.
Trust Of The Customer
As cyberattacks and data breaches are still harrowing issues, security has been pushed to the forefront. Cybercriminals primarily target fintechs, due to the sensitive information being handled by such companies. So you must be very careful to safeguard your companies data, as having it stolen will definitely result in the customer losing trust in you.
Customers are skeptical about handing over their money and other financial information to new fintech services. So you need to be able to convince the customers that their money and information is safe with you due to the reason that you have employed adequate measures of safeguards in places to protect it.
Importance of Having a Strong Team
Barriers to building up a fintech startup are relatively high. There aren’t any predefined free scripts or turnkey tools that will enable you to easily develop a service or an application overnight. You need to have the right technological, financial, and corporate expertise to develop a fintech company. Compliance issues will also require the services of a legal team.
As this is a multidisciplinary effort, you must ensure to build a strong team by attracting talents from all of the above-mentioned competent areas. This team must be qualified enough to guide efficiently the overall activities of your company. The team must also have the ability to quickly change the company’s direction in the event of an emergency, as most fintechs are still in a state of flux.
Importance of Valuable and Unique Service
There have been many pioneers in the fintech industry who have made a strong position, which has encouraged more new ventures to follow their footsteps. So with all this competition in the market, you need to ask yourself if your company will be providing something unique that will be of high value.
Fintechs are now venturing into new service sectors such as budgeting, personal finance, insurance, lending, and payments. And all startups want to offer better solutions to customers’ problems and new ways of achieving it. So you must refrain from becoming a me-too service provider by copying a similar service that has already been provided by an established company.
So you need to come up with better and more innovative ways of providing the services to your customer. Give them a reason to choose you by offering a more simple way of achieving their goals. Although preaching your novel value propositions to a more traditional older age group might be a challenge, you need to overcome that by strong communications and a convincing marketing and customer support team.
Choice Of Technology
Fintech has introduced a number of new technologies involved in providing the services to the customers. Companies are investing in technology such as Artificial Intelligence and Machine Learning, due to new tech like Robo-advisors entering the scene. No wonder age-old financial practices are being challenged by this new algorithm and data-driven approach of investing.
One of the new technologies are chatbots that the banks are using to help customers check their information through Facebook Messenger. Distributed Ledgers and Blockchain are also hot-ticket technologies in fintech nowadays. Blockchain can be poised as the biggest threat to conventional banking as it is the main technology powering Bitcoin. Bitcoin is used to exchange value online in a decentralized way.
So be open to using these new technologies to be able to provide more efficient and faster service to your customers. You must also be prepared to face the pain and hiccups of using these new methods as they are yet to be fully matured.
It takes quite a bit of investment to form a tech startup. You must be able to invest a good amount of capital to recruit talent for the teams. Hiring might become a bit of a challenge for a startup as most fintech talents are scooped up by the traditional institutions. Not to mention the operating and capitalization costs that are associated with getting the business up and running.
Your costs will also go up as you have to integrate your business with traditional institutions like brokerages and banks. No need for despair, as the funding for fintechs is at an all-time high. Since this also means more competition, you have to come up with new and fresh ideas that make your proposition stand out and have more value. That is the best way to have VCs select your project for funding.
Fintech is a competitive and volatile industry. So it will require a lot of creativity and expertise, not to mention resilience to launch a startup here. The world of technology is changing at a very rapid pace, while the realm of finance responds very slowly to change. So you must be able to balance these two worlds to solve the financial issues of your customers by using innovative means. Best of luck with your new startup!