5 Major Challenges Faced by Entrepreneurs Trying to Enter Fintech Space
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Digital disruption has made a powerful impact on the financial services industry. Fintech startups are the major players in this space challenging the operations of traditional financial institutions like banks.
In recent times, Fintech space has seen a lot of entrepreneurs trying to jump on to this bandwagon by coming up with innovative products to make it a successful endeavour. Before these entrepreneurs can make their mark in this highly competitive landscape and taste success, they have to undergo numerous challenges. Here are the 5 major challenges faced by such entrepreneurs vying for their share of Fintech space:
Before starting a new venture, it is crucial to understand the regulations and laws governing the business you are entering into. It is common knowledge that Financial services industry, especially in India is a highly regulated area. Entering this space requires a huge amount of understanding with respect to norms to be adhered to as per local laws by the players.
The winds of change blowing across the globe are much stronger in India on the digital front, largely thanks to the vast pool of English speaking and educated talent pool of human resources, governmental push for digitalization and the sheer market size. This has led to Fintech startups coming up with innovative ways to carry out financial transactions forcing the lawmakers to come up with new guidelines on how to regulate these new business models. A case in point is P2P Lending.
- Competition from Banks:
Although banks are acknowledging the digital disruption created by Fintech startups, they are not going to easily let go of their businesses to these startups. A few banks have already started to adopt the latest technological innovations to stay ahead in today’s ultra-competitive business environment. A few others are in the process of partnering with these FinTech firms to leverage their business models and offer customized financial products to their customers.
Building Customer Trust:
The target audiences for Fintech companies are consumers from financial services sector for whom the major concerns are security and reliability of data. Such people often go along with a traditional way of managing their finances than adopting the latest innovations.
To bring such audience onto your platform and make them believe in your idea is always a hard puzzle to crack. It is where these startups are required to step up and build customer trust making them believe that the platform they are adopting is robust and secured.
Building a strong team:
It is critical for Fintech companies to have a blend of well-diversified and skilled team members having relevant expertise to handle technological, financial and business operations in an efficient and productive way.
Since the entry barrier to financial services industry is quite high, building a team which possesses great competency remains the key to success for these entrepreneurs, apart from building a robust, efficient, secure & scalable platform
Higher cost to start a Fintech:
Starting your own Fintech venture is not cheap though. If you do not have in-house experts to build your product and platform then you are required to spend a lot to bring in the requisite talent. In addition to administrative and operating expenses, adoption of technological innovation adds up to the increasing cost of forming a new FinTech business.
Despite the above challenges many entrepreneurs have converted their business idea into a technological disruption making use of technologies like Artificial Intelligence, Machine Learning and Big Data thereby providing customized financial services to the end users and emerging as a game changer in Fintech space.