How to Start a Fintech Company (Ultimate Guide)
The challenging space in fintech is something that is yet untapped but still full of potential. The dynamic concepts in neobanking are something that all work for but never get to reach.
So what is it about fintech that attracts much attention and is all the rage in this post covid era?
Let’s find out!
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What Is Fintech?
A fintech firm is one that applies technology to meet customers’ financial needs. Any fintech competes with traditional banking in terms of services and efficiency.
Customer experience is top-notch for some fintech and is far superior to traditional banks.
Banks insurers and lenders are themselves increasingly dependent on lenders to streamline their operational work. So people are choosing fintech where the technological aspect is already in place.
You can check other business ideas to start your business.
Smart tips to start a fintech company
1. Know Your Regulations
For very obvious reasons, fintech and banking are highly regulated industries. It is important to know everything about the core regulations of this complex industry.
Laws and legal restrictions define the very nature of fintech. Data protection laws all over the world have been a major blocker for the industry.
This includes anti-money laundering policies and the KYC processes,
Certain digital certificates and authentication processes may need to be followed which makes it more difficult.
A global launch can be an even bigger pain since laws differ around the world.
And where there is money involved, there is expectations and responsibility that you can never fully get rid of.
For example in places like UAE or Mexico, specific market regulations with fintech licenses are required that need special licenses.
2. Understand Your Niche
Fintech is a large sphere so make sure to consider the sub-domains that work best for your interest. They may be:
3. Do a Thorough Competitive Analysis
Immediately after finding your niche, getting to know your competitors, how they fare, how to measure them against the market share they own, what is the benchmark you should set from that, etc are the technical details you will have to figure out.
Even if it is a lowly competitive and new industry, find what you can do to improve the quality of existing tools and the market. That’s where innovation and entrepreneurship skills will be tested.
In fact, the business opportunities are so extensive only because the industry is relatively new.
Additionally to beat the fair few who have made it to the top in the niche you consider expanding it can be beaten at their own game if you have an excellent execution scheme.
Sharing ideas is an integral part of this process. Brainstorm the best ideas after taking feedback from your initial clients.
The most successful companies were focused on creating convenient applications with relevance to the target audience.
4. Hire Your Team
The right people YOU are comfortable with are the best people.
Any successful fintech startup needs people who are willing to provide feedback, are transparent, and with those who can be trusted.
Yet attracting the best is no cakewalk. Moreover, the most experienced tech developers and marketers do not come cheap, so it will seem like walking a tightrope.
One of the best ways to go about this is to hire a remote tech team at a reasonable cost and with relevant domain knowledge.
5. Choose Skilled Software Development
You shouldn’t be forced to rely on others for custom software development as it is a core aspect of fintech applications. Third-party dependence is not recommended nor is it possible as a long-term option.
Tech stack can be used to create the right designs for fintech apps.
Programming languages required:
6. Data Protection Should Be the Number 1 Priority
Especially in the post covid world, data protection is the next big thing, so it makes sense to prioritize this aspect. All sensitive data is encrypted and safely stored in the cloud.
Fraud Blackmail and theft are one of the most pressing issues for fintech. Run intensive testing to check the course code. Bear in mind network connections need transport layer security.
You should be particularly aware of unauthorized API connections to protect the clients’ data.
Building your infrastructure carefully is important. To do this opt for cloud platforms like AWS, to offer strong protection against DDoS attack that backs data in case of any network disruptions.
Ensure your customers are aware of protective practices to use complex passwords:
7. Focus on Funding
Funding is absolutely essential especially if you are in a fintech that provides credit to businesses.
Sources for funding may be:
Pro tip: Build a visual prototype that will help you pitch to investors in a way they cannot refuse your proposal.
8. Expand and Improve
Start with building a minimum viable product and make note of the product features, and collect users’ feedback to improve.
Post that, just expand on this.
Why Are Fintechs All the Rage Now?
Demand for fintech services and their benefits have only attracted many business clients.
COVID-Driven Contactless Payments are another major reason for the growth of the fintech sector.
In the pre-covid era itself, sound predictions were made about the explosive growth of fintech.
Different avenues are being brought into the market with different types of financial software. Neobanking is the next big thing, where both big corporates and startups are both on the rise.
The following are the specializations the subdomains are focussed upon :
Let’s break down the reasons why starting a fintech is a good idea:-
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#1 Rise In Demand
Insurance technology, personal money applications, and B2B payment solutions are getting more and more personalized and people are increasingly finding them useful.
No wonder the rise of fintech businesses has been exponential in the last 3 years.
Launching your own fintech company means, you are solving the solution of millions of other people who require your services.
Companies moreover want to automate their operations rather than waste time with manual payment processes.
#2 Skillful Applications
Building a fintech will ensure developers gain more skills and expertise in designing the kind of software needed in practical applications. Programmers are increasingly moving towards fintech to have the best of both worlds.- finance and technology.
#3 Rise of Insurtech
Perhaps no other fintech is more popular than insurance technology. Its data-driven forecasts are fast gaining popularity.
Insurtech uses AI to process the criminal and medical records of people along with their credit history.
Hence technological tracking has helped this sector boom.
#4 Enterprise Accounting
This is a sector that is yet untapped. Post covid the shift has been pretty drastic with the covid pandemic. Enterprise fintech has become a very competitive niche with amazing perks. Tapping into this will not go unrewarded.
#5 Cryptocurrency Era Has Arrived
The time is long gone when digital currencies were all the hype. It has become a common concept that is reliable and convenient for all.
User satisfaction is everything that currently none of the crypto platforms provides. So you can start a fintech company in crypto just to provide quality services.
Industries like Binance or Coinbase may seem impossible to beat, but any sleek secure app for your crypto business may be the game changer.
#6 Integration With Corporate Infrastructure
The industries connected with fintech will only gain profits. So secondary industries like the SAAS industry will only see a rise in their demand. This is another reason why starting a fintech business is becoming more and more attractive.
#7 Spoilt for Choice With Tech
Fintech is all about AI, ML, and state-of-the-art infrastructure to ensure encrypted tech.
Robotics and, internet things are only going to see a full extension with fintech integration.
Two of the best examples that can be provided as an attractive and successful fintech startup would be proStripe Mint.
ProStripe specializes in online payments and is one of the most popular online payment gateways. With a solid focus on funding, they were able to raise a whopping $475M across 9 funding rounds.
Major Takeaways:- Success Factors
No wonder it transformed Stripe into a $35 billion fintech giant.
Mint on the other hand is a fintech focusing on personal finance management.
With a funding gain of $31.8M across 5 rounds, Mint shows the way for what success is defined.
This app is provided by Intuit. Their services include account management budgeting, bill payments, and expense tracking.
You get everything in one app which is what sets it apart.
Major Takeaways:- Success Factors
Pro tip:– Avoid the iterative development method and focus on improving the application(app). With extensive feedback from trial experiments, Mint founders knew what to expect when they released the app.
What resonated with users was known during the trial period itself with the promise of “bank-level security”,
How to Get Started?
This stage shouldn’t be underestimated because:
How Does a fintech make money?
Now that you know how to establish a fintech firm, you will have to also focus on making it profitable.
As per a recent Fintech report on financing, the stats pointed to international fintech like KuCoin, and Coda raising funds to $10 billion each.
If that wasn’t convincing enough another report published by CB Insights, found that wealth technology in fintech was the industry that saw a rise in closing deals, up to 36% year on year (2022).
Payment completion dates have also been fast-forwarded with fintech using SaaS-based tools to challenge traditional banks.
1. P2P Lending
Peer-to-peer lending is for those who need to borrow money from one another. Businesses may borrow money sourced from other businesses.
Fintechs focussing on such a model will help investors trust their investments are in safe hands. Such fintech also goes on to bridge the gap between lenders and borrowers.
2. Digital Insurance
Services being delivered in the banking sector have undergone a rapid transformation all thanks to fintech.
They offer better insurance than traditional banks and they charge different premiums custom made- based on each customer. So personalization of services is high.
Their underwriting methods are more intensive. If integrated with customized marketing, these types of digital insurance can act as a new source of income.
You can check business insurance ideas.
Neobanks are called challenger banks for a reason. They aim to provide a 100% digital banking experience to make banking more affordable and adaptable.
Most of them seek to handle online bank accounts, savings, budgeting, bulk payment transfers, etc.
All in all, everything about the fintech business is attractive in this digital era where actions are measured in seconds.
So go ahead and be bold and creative. Grow your business to new heights.
Choose your fintech niche and start building your dream.
After all, fintech is here to stay.
Ramitha Ramesh is the editor at Karbon Business, working as an SEO content marketing strategist for Karbon, with clients from the US, UK, and India. You can find her blogs anywhere in the fast-driven sphere of finance, business, and banking.
She is also an expert in vendor management processes that makes business payments hassle-free. Finding nirvana in food, fun, and travel, she is on a mission to save the world from infodemic emanating from the digital world, through her blogs.
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