Starting a FinTech company is not an easy feat. Unlike regular startups, Financial Technology (FinTech) startups have twice as much work to do in order to establish a new company. Since FinTech companies are both businesses and technology providers, these startups have to ensure that they are operating optimally on each of these ends before they can successfully launch.
If you’re thinking about starting a FinTech company, there’s a lot of planning, research, and testing to be done in the early stages of both business and product development. You’ll need to ensure that you have a firm grasp on all things related to the financial industry, the types of services you want to offer your customers, and the audience you want to market to, among other things. It’s understandable if you are feeling overwhelmed. Fortunately, there are a few things you can do to better prepare yourself for the journey ahead.
Having partnered with several financial tech companies throughout the years, we here at Koombea know what it takes to make it as a small business in the financial world, especially if you are considering creating an app for your products and services. So, to help you get started, we’ve put together a list of key steps and vital information that all FinTech startups should know before they embark on the process of starting a FinTech company.
Have a Clear Understanding of Both Finance Industry and Technology Regulations
Anyone thinking of starting a FinTech company should have a keen awareness of the regulations that govern both the finance industry and tech software products, such as web and mobile apps. Financial information is extremely sensitive and there are strict laws that determine the way this data is shared, stored, and transmitted.
As far as regulations are concerned, different countries abide by different standards. For example, FinTech companies in the European Union (EU) or those offering services to EU members outside EU territories must adhere to the General Data Protection Regulation (GDPR) legislation for the transmission of consumer data, particularly when that data is being transferred outside the EU.
The U.S. currently doesn’t have a single law regarding the transmission of financial data, and instead, sets legal standards depending on the type of data in question. For example, FinTech companies that offer payment services must adhere to the Payment Card Industry Data Security Standard (PCI DSS). U.S. FinTech companies are also subject to individual state and federal laws. Many FinTech companies are often required to register with individual agencies, including the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTD), to name a few.
These regulations are in place to protect both consumer and business financial data. However, these laws (including privacy laws) don’t just apply to the data being transmitted between banking industry players or payment processing companies; they also apply to the data being accessed on web and mobile apps. For these reasons, FinTech startups should ensure any software being offered to the public is extremely secure, especially with regards to web and mobile applications. FinTech companies should encrypt all data being transferred, set up two-factor authentication systems for logging into accounts, and continually monitor systems to prevent and address potential data hacks.
Determine the FinTech Services You’ll Provide
FinTech is a broad term used to describe a wide range of technology products and services that facilitate financial transactions or the management of an individual or business’ finances. Because there are so many different types of financial solutions available to consumers and businesses alike, it’s very difficult for a single company (especially a startup) to provide every type of FinTech service to customers.
If you have considered starting a FinTech company, it’s important to narrow down your services to a specific niche, such as general banking or lending. That way, you can focus your time and resources on this area and work toward becoming a leader in this niche. Below are some of the different types of FinTech niches to choose from:
- General banking
- Wealth management
- Investments and trading
- Payment services
- Money transfers
- Currency exchange (including electronic currency)
- Tax services
- Mobile banking
- Payroll services
- Credit reporting and monitoring
- Data security
- Market research
Regardless of the FinTech services you choose to provide to your customers, it’s important to ensure that you offer something innovative. You don’t have to reinvent the wheel, but if you want to stand out, make sure your startup provides a solution to a customer need and in a way that hasn’t been done before. This can be accomplished in a number of ways, but for startups, the best way to stand out and attract customers is by offering a very specific service to a very specific audience, such as an app that provides financial planning tools to single mothers or a mortgage lender comparison service for veterans.
Get to Know Your Audience
Determining the types of FinTech solutions your startup will provide goes hand in hand with the audience you will serve. It’s important to know who you are marketing to because not everyone will find a specific FinTech product useful. For example, if you choose to provide retirement finance services, your target audience will be more mature. If you provide mortgage rate comparison services, your audience can be a bit broader.
Once you have your target audience set, you can also design your FinTech web and mobile app accordingly. This is crucial to the success of your business because just as some financial products don’t necessarily resonate with certain demographics, many app features will not be attractive to your target market either.
Younger audiences prefer vibrant and animated graphics in their apps and are able to navigate more complex functionalities. More mature audiences tend to prefer simple app features and straightforward information. Getting to know your target audience with respect to their financial needs and technology preferences is a vital step to take when starting a FinTech company because choosing the wrong audience to present your product to or offering an app they will not find useful can hinder you from gaining loyal customers.
Research Your Competitors
After determining your services and target audience, the next step is to research your competitors. Check out some of the top FinTech companies in your area to see how they are positioning their brand as well as how they are designing their FinTech apps. This will give you a general idea of what you are up against and the current FinTech trends that your prospective customers are looking for.
Choose a Web and App Development Company
By now, you’ve probably already chosen a team of professionals for your new FinTech startup. However, it’s equally important to select the right web and app developers to ensure your software is optimal and provides a great User Experience (UX). Only a world-class digital product will ensure your startup’s success.
Each development company has its own preferences regarding its tech stack, meaning the programming languages, frameworks, and databases they use to create websites and apps. It’s important to choose a development team that has experience building FinTech applications so they know the tech stack that’s best for your particular product and the specific privacy regulations your software will be required to abide by.