According to a recent report, Fintech revenues grew by 14% annually between 2021 and 2023, underscoring their consistent growth and profitability.
For people that love tech and finance and have caught the entrepreneurial bug, Fintech can be a rewarding way to tie all your passions together.
However, like any other venture, profitability is dependent on you getting the fundamentals of your business in place right from the start.
Here is a complete guide to help you set up a lucrative Fintech company.
There are two main ideas to think through. The first is defining a niche and the second is figuring out how to solve a pain point.
As exciting as it is to begin a venture, resist to urge to try to do everything all at once. Instead, identify an area of Fintech that excites you most and grow that idea. With that said, the following fall under the Fintech umbrella:
Once you zero in one a niche, begin thinking about how you can disrupt traditional banking and financing institutions. Similarly, think about the gaps in the existing Fintech services. Why should consumers pick you over all the other Fintech companies around?
The answers to this will give you a competitive edge that will drive your business success in the long term.
18% of start-ups fail due to team and human resource related issues. Businesses can quickly go under because of poor hiring decisions, because a business depends on a team to carry its vision. And this goes beyond skills and experience.
When setting up a business, you already have an idea about the values, attitude and culture you want to see in the enterprise. Good hires are knowledgeable, experienced, and also align with the values you want your business to portray. Finding this balance is never easy, not even for seasoned HR practitioners.
While you have your hands full trying to set up your Fintech, it might be useful to get help with staffing with a recruiting agency. A useful resource that you should consider is Techtrust. Techtrust has a comprehensive hiring approach that covers finding and rigorously vetting candidates to identify the best match.
It’s important to develop a Minimum Viable Product (MVP) before going full throttle and investing heavily. A Minimum Viable Product is a basic version of the final product you want to bring to the market. It serves as a stepping stone, allowing you to test drive your product without overextending resources.
Some of the insights you will get from this include:
An MVP calls for Fintechs to find a delicate balance. While the MVP offers the most basic version of your product, it also must offer users sufficient tools and features to experience your service.
Data security should be a top priority from the get go. Not just that, but it should be part of your initial conversations, such that your technology company should integrate security into each phase of the development phase.
Data protection ensures all your data is safeguarded through encryption and secure cloud storage. A security breach can potentially fuel blackmail, theft, taint your reputation and even fraudulent activities.
Here some key Fintech security practices:
Data encryption prevents unauthorized eyes from viewing your data. Once data is encrypted, it’s protected from unauthorized external access on storage devices and during transfer.
A two factor authentication is a system that requires two different authentication types before granting a user access into the system. These two identity types are typically a password or a PIN, followed by a code via text or an authentication app.
Releasing an app is half the job. The other end of the equation is maintaining vigilant surveillance to ensure potential data breaches are identified and mitigated. Keep in mind that the longer it takes to identify and fix an error, the more expensive it will be to fix.
Tokenization replaces primary account numbers (PAN) with tokens. This limits cardholder data exposure and mitigates data breach risks.
Artificial intelligence forms a basis for fraud deployment systems by monitoring customer behavior and spending patterns.
One direction to take on this is to go for decentralized storage within your Fintech product. This renders it impermeable to hackers looking to breach a centralized data storehouse.
One thing Fintechs can’t afford is to waste finances as they are fighting to penetrate their target market. By prioritizing security from the initial stages either in house or with the help of a cybersecurity recruitment firm, your startup saves money throughout the development phase and you ultimately launch a secure product.
Often, Fintech involves navigating a maze of rules. It’s essential to understand these as early on as possible, so as to develop a compliant product. GDPR and HIPPA. There are also regulations specific to certain jurisdictions or devices your software will be accessed on.
Additionally, you will need the following licenses to operate:
This is a legal requirement for nay establishment that will take cash deposits from the public and /or offer lending services.
You can’t operate as a bank or financial institution without this, and this serves to protect the public.
This is a requirement for entities whose operations include issuing electronic money for customer use. Again, this protects the public from misuse of funds and potential scams.
Payment Institution Authorization is necessary for businesses looking to provide payment services but are not categorized as banks. This license safeguards consumers, ensues standardized practices and upholds the integrity of the financial system.
Having a clear understanding of the law and regulations around Fintechs helps you develop a compliant product, prevents legal mishaps and fosters credibility among prospective customers.
There are several ways entrepreneurs can consider to fund their Fintech ventures.
You could bootstrap your company, which means you come up with the money to fund your venture without taking money from investors. Other options include crowdfunding, venture capital, traditional bank loans and initial coin offering.
At times, Fintech startups combine several funding strategies to raise enough capital to get the venture off the ground.
The direction you take on this is crucial and has long term consequences to yourself and your business. As such, this should be a decision made methodically and systematically.
Begin by listing out viable funding options, and evaluate each comprehensively. Think and research about the benefits of each option, the interest rates and associated risks and find an option that aligns with your vision.
You also need to have a thorough understanding of the requirements of each option. For example, should you opt for venture capital or other investors, you will likely have to cede a stake in your company, or some control over your product.
While Fintech development is a complex process, it’s also a worthwhile venture that can be extremely rewarding in the long term when done correctly.
This means getting all your ducks in a row from the conceptualization stages to marketing. One thing that can make things easier is having the right team around you. As you worry about everything else, let Techtrust work its magic on getting you the right people. Contact us with your hiring needs today.
