#8 Things to Know When Starting a Fintech Company
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It's interesting to see, how within no time, fintech has become a vital part of our day-to-day lives. With the ever-growing fast world of technology, finance has found an important place in the digital world. Even you don't follow the market, understand stocks or finance trends, you have certainly used one or the other fintech app. Wonder how? Fintech app is anything related to your online payment, cashless transactions, or banking solutions. The last couple of years have seen a hike in the adoption of financial technology services globally.
It goes without a say that technology is changing the traditional financial industry. So in case you are planning to dip your toes and venture into this industry, this is the right time. With startups entering the market every month and giants already ruling the industry, it's hard to make a mark.
This market is very lucrative but starting a fintech requires more attention than most businesses. The start of your company will shape its future, growth, operation, and more. But, how do you even get into fintech? To understand the same we spoke with Andreas Vezonik, CEO and CFO of renowned financial services companies Transfera and VolumeX. Having consulted various FinTech startups he tells us eight important things that will shape your company’s future, growth, operation, and more:
1. Idea & Timing
The right idea at the right time can be worth a fortune. It's interesting to see how several fintech companies in the market have an outdated product but millions of clients worldwide. Why? Because they started at the right time.
"When you have an idea, write it down and after analyzing possible competitors start as soon as possible. Technology is improving fast and maybe your current idea won’t be good enough in two-three years," said Andreas Vezonik.
2. Define your goals
Ask yourself -
- What do you want to achieve?
- What are your goals and visions?
Fintech companies with good technology can be a perfect way to earn a lot of money by selling the company to a bigger competitor.
"Many don't realise but it is vital to think about selling at the beginning to make a good company structure. It has to be safe and legal so you will have easier access to more markets and investors who could potentially buy shares and help you grow faster," he said
Have a distinction between your personal and company goals. Have answers ready for the following questions before launching a company:
- How many clients do you want to reach?
- Which markets do you want to target?
- Which additional features could help you achieve your goals faster?
3. Proof of Concept
Have an idea that could work in certain markets? First, look if any other players are offering the same or similar services as you. Look into these companies very deeply and analyze their customer base, their products, markets, and usability.
"With clients that have come to us, I have seen in most cases ideas come by using many different financial services and having suggestions for improvement or adding certain features that your current provider does not have. Especially in the fintech market, technology needs to improve at a rapid pace. Something that works today could be outdated in 3 years," points our Andreas.
One that is done, try to make it easier for clients to join or buy your product than the competitors. Very essentially understand that online services are cheaper. So before launching a company think about how you can make it cheaper and easier than others.
4. Budget & Funding
If you believe in your idea and have enough budget then be your funder. If that's not the case, carefully calculate the possible worth of your company's shares and search for possible investors who could invest in your idea and company.
"Be careful not to sell too many shares of your company at the beginning because you will regret it later when your brand touches millions. You need a good business plan for a good team to achieve your revenue targets. Make a proper calculation of all incomes and expenses you will have, could have, and some unexpected expenditures as well," he suggested.
5. Regulation Before
When it comes to applying for proper licenses and regulations you need to define your targeted markets. Understand that each country has different regulation, so you can either choose to regulate your business in each country or you start applying for a license in a country which has the highest regulation standards.
"When you want to offer financial services you need to have a good KYC & AML program which is valid in all operating countries and markets. First and foremost find a good back office that can support your company in the regulation process and don't search for 'cheap' solutions because you will face problems later," said Andreas.
6. Software & Security
A good IT team can do wonders. They are responsible for the development and can create good software which the prime focus when launching a FinTech company.
"In such cases, you should choose somebody whom you know personally and can trust. Don't opt for any 'online scripts' or 'cheap back offices' because most of them are not secure enough for FinTech level. Invest enough money for security and software technology because your company will be responsible for possible errors or software bugs," he highlighted.
7. Scaling Strategy
Many entrepreneurs fail in the execution of scaling strategy and having enough resources for maintaining a huge customer base. When you reach a certain level of customers you will need more employees.
"In many cases that we have observed, companies employees will have to go through an onboarding process and this can take weeks. So before you reach that level of chaos - have some people on hold and make them ready to start even if you don't need them right now," said Andreas, a native of Austria, who has developed his digital financial brands into an educational platform in Europe which has expanded to 30 countries and serves more than 15,000 people.
Once that step is sorted, find a good advertising-marketing team that will help you market your product and build clients in different countries.
8. Start & Launch
Amateurs START a business, professionals LAUNCH a business. Even if the launch of your company is not the most important thing, it can be the key to your success.
Taking about a curial step he said, "Test your software and the whole process weeks before you are set to launch to avoid bugs or errors in the system. Think about a “pre-launch” period to test certain features with a small group. This will help you to avoid unexpected failures and you will get feedback on your products before launch. This will give you time to fix what your service lacked."
While the above guidelines can certainly help you, understand that to open a company in the FinTech market can be very challenging and could take months. You need a lot of patience and enough budget to build a good service that your clients will love.
Keep in mind that technology is changing the world and we are adapting to the new digital era every day. Especially there has been a huge shift with technology taking over financial services like digital payments, online bank accounts, or credit cards. This is the new normal and the future. If you bring enough discipline and patience you could be the next FinTech rising star in the world of financial services in the next years.