In a world of fast-growing technology, finance has taken an important place in the digital world. The last few years have seen a surge in the adoption of financial technologies worldwide. It goes without saying that technology is transforming the traditional financial industry.
So, if you are planning to get into this industry, now is the right time. It’s hard to succeed if start-ups enter the market every month and giants already dominate the industry.
This market is very lucrative, but launching fintech will require more attention than most businesses. The beginning of a company determines the future, growth, and performance of the company. But how can you get into fintech? Or how do you start one? To understand the same, I have listed the top 8 things to know while starting the fintech business.
Is it Worth Investing in the FinTech Industry?
The financial technology or the `fintech` industry is creating a way for swift transformations in financial solutions and banking services. With increasing industry players, it is no doubt that fintech start-ups and Fintech App Development Companies can make a more persuasive investment proposal for big entrants in this marketplace.
Whichever investing path you choose, it’s clear the fintech sector has grown considerably in recent years as more private equity and fintech investors enter the space. The industry looks likely to keep expanding in the future.
If you’re serious about investing in fintech, there are several ways to get into the fintech space, including exchange-traded funds (ETFs) and stocks. Despite the challenges in 2020, the global fintech market is expected to grow at a CAGR of about 20% between 2020 and 2025.
However, the rising risk of fraud and scams, and its lack of physical branches is a drawback you should consider before investing.
8 Factors to Consider When Starting FinTech Business
Understand the Regulations:
It is important to understand the fintech and banking industries since they are highly regulated. There are many laws governing the industry, such as anti-money laundering (AML) policies, Know Your Customer (KYC), and The General Data Protection Regulation (GDPR). Many other government financial bodies regulate fintech companies based on their jurisdiction.
However, the top regulatory bodies are the Federal Deposit Insurance Corporation (FDIC), Commodity Futures Trading Commission (CFTC), Consumer Financial Protection Bureau (CFPB), and Office of the Comptroller of the Currency (OCC).
You should learn about these laws and how they will impact your business if you plan to launch a start-up accessible globally. These laws vary from country to country and, in the United States, from state to state.
As soon as you`ve chosen your niche, get to know your competition. This will help you find something that will distinguish your product from the existing solutions, a unique value, or competitive advantage.
This can be a completely new product targeting a specific niche market (e.g., financial services for the underbanked) or simply improving the quality of an existing offering (e.g., fast and simple mobile banking).
To make a break in the fintech market, you should, in most cases, bet on a stellar execution of your idea. Share your ideas with as many potential customers as possible and try to unravel which parts of your future application resonate with users and which are redundant or broken.
Choose Your Domain:
Choose a niche for your fintech business before jumping into the fintech market. Popular niches in the financial market include investment management, lending, global remittance, loans, and advance payments, blockchain-based solutions, crowdfunding, and financial products.
In addition to choosing a subdomain, you have a set of target audiences. For example, your product may target a specific audience. Country or demographic group. However, it is recommended to start locally first and globally if necessary.
Having the right people by your side is one of the ingredients of a successful start-up. Yet, attracting top financial app developers and growing your team on site might be challenging, especially if your location has a limited talent pool. An additional point which can’t be overlooked is the simple fact that experienced engineers in the USA don’t come cheap.
For a start-up, the best decision is to hire a software development team offshore and to consider a more cost-effective location such as Eastern Europe. This can help you build a really strong team or even find specialists with specific domain knowledge or relevant experience, all at a reasonable cost.
FinTech App Development:
Fintech is not an easy industry to target. With all the pitfalls to consider, developing a successful FinTech application takes time and effort. But when you have the right people around, everything becomes easier. A team with strong technical skills and solid domain experience will help create truly great products.
The product familiarization phase is the best first step you can take to lay a solid foundation for application development. This includes functional specifications, UX/UI design, and visual prototypes that give you a clear idea of the end product. On average, this stage takes about 4-6 weeks.
Ascertain that your product is safe and that all sensitive data is encrypted and saved in the cloud. One of the most serious fintech security problems is the leak of sensitive information that can be exploited for theft, extortion, or additional fraud.
Run comprehensive testing to evaluate the source code for any vulnerabilities to ensure top-tier financial cyber security for your firm. Apply transport layer security (TLS) to all network connections, prohibit illegal API connections, and secure your clients’ information with an HTTPS SSL certificate.
Budget and Funding:
Be your own financier if you believe in your concept and have sufficient money. If this is not the case, carefully analyze the potential value of your firm’s shares and look for potential investors who could be interested in your idea and company. There are several methods to fund your company. Bootstrapping to bank loans, crowdsourcing to venture capital, and so on.
You might also enter a business competition or borrow money from family or friends. Whatever direction you take, it would be helpful to have something to offer potential investors. Thus, creating a visual prototype is an excellent method to construct a strong pitch deck that will help you get funded.
Prove Your Idea and Implement It:
You may begin developing your fintech firm as soon as you have completed all of the above-mentioned steps. However, we highly advise beginning with the minimal viable product (MVP). Build the bare minimum of functionality necessary to test the idea, get user feedback, and enhance.
When developing an MVP, there are several dangers to avoid. However, starting small and gradually expanding your offering is a wise method to limit possible dangers, especially in such a saturated and competitive field as fintech.
As more organizations create their applications, the fintech sector is booming. As a result, you should be a pioneer rather than a spectator. While this is not an easy industry to break into, with this approach and a strong team of tech experts and subject experts, you can establish a successful fintech firm and app that will grow.
Now that you know how to launch a fintech firm, seize the biggest chance in the industry and join the revolution. Your firm could be one of the finest global fintech start-up applications in categories including mobile banking, mobile trading and investments, online payments, personal financial management, and so on.
If you’re launching a new fintech company, the best way to lessen the risk of entering this saturated and extremely competitive fintech market is to start small and constantly develop your product.