Financial technologies are developing successfully and rapidly. It is a market rich in money and opportunity. The auditing company Deloitte writes that the fintech industry is worth about $180 billion. The fast-growing industry is expected to reach $174 billion by 2023 and $188 billion by 2024. Therefore, the number of new fintech companies is increasing every month.
The main goal when developing a fintech startup is to make the relationship between people and finance more convenient. Startups increase the efficiency of financial services and minimize human error.
Fintech startup basics
1. Study the industries that are represented in fintech as a starting point
First, you need to decide which domain you want to work in. Listed below are some options:
- Digital wallet and payment system development;
- Cryptocurrency exchange development;
- Financial solutions based on blockchain technology;
- Work with international monetary payments;
- Work with personal data protection;
- Development and maintenance of neobanks;
- Development of P2P lending platforms.
There are many promising fields in fintech, so you should rely only on your personal preferences.
When choosing a direction, you should consider how your project will be different from others, how your service will solve customers’ problems and allow you to earn money at the same time. And you also need to plan an approximate vector of development for the next few years, and possibly decades. The answers will help you develop a marketing strategy, decide on the type of license, the jurisdiction for registering a fintech company, and other technical details.
Many startups began as ideas to solve personal problems faced by entrepreneurs. Therefore, it is worth paying close attention to the idea and direction. Next, we will analyze some areas of development in more detail. Maybe some of them will inspire you to develop a convenient solution and a successful project.
- Digital Payments
In this direction, fintech companies are working on the creation of mobile payment fintech apps and digital wallets. Startups are implementing relevant developments to make digital payments convenient, secure and affordable.
- Personal finance
As an alternative to traditional financial services, fintech companies are developing tools to help consumers manage their finances. Such tools can be budgeting fintech applications, investment platforms, robo-advisers, etc.
- Blockchain and cryptocurrencies
Blockchain and cryptocurrencies are transforming the financial sector, offering new opportunities for secure and transparent transactions. There are new blockchain applications, exchanges, cryptocurrency wallets. The use of blockchain-based smart contracts is developing and becoming more popular in various fields. Startups that are able to provide secure and user-friendly solutions will be successful in the future.
Fintech companies are also active in the insurance industry, offering new tools and products to help consumers manage and purchase insurance policies. These tools also focus on digital claims processing and personalized insurance products.
2. Determine your company’s advantages
Once you have decided on a direction, you need to study the competition. Your product must solve a problem that has not been solved before. Financial services is a wide market niche in which it is possible to find the right gap after studying the market. It is also possible to improve the existing solution, which will win in the competition with the rest. Due to the growth and expansion of the fintech industry, this sector offers a variety of business opportunities.
It is also very important to conduct a competitive analysis in your field. For your startup to stand out from the crowd, your idea must be interesting, relevant and personalized.
3. Find a product development partner and define the technology stack
One of the key success criteria is having a professional team working in a startup. You can build it from scratch or find a contractor. In the financial industry, it is common to invest money in people. This is not surprising, since talented people are the driving force behind a project. Therefore, it is a good idea to find a product development contractor. A dedicated team of professionals will save you time and money. A properly selected contractor company will provide high quality recommendations for your solution and prevent a lot of mistakes.
It is also important for a startup to consider the framework, database and programming language it will use for its product. You need to provide top-notch cybersecurity and a strong infrastructure. This will ensure limited or no data breaches and greater security for sensitive customer data. Since customer data is of paramount value in fintech, this is very important.
4. Take care of privacy
Security is really important. The data you store in the cloud should be encrypted and secure, and your product should be protected against hackers. One of the most pressing security concerns in financial technology is the leakage of sensitive information that could be used for blackmail or fraud.
Use an HTTPS SSL certificate to protect your customer data, enforce Transport Layer Security (TLS) for network connections.
Multi-factor authentication should require clients to use complex passwords. Moreover, if you would like to combine everyday convenience with a high level of data security, turn on facial recognition and fingerprint scanning.
The rapid development of the industry has been stimulated by the covid pandemic, which has increased users’ demand for online services. There has been an increase in the demand for payment and billing services, as well as in the peoples’ desire to manage their own finances and have more opportunities available online. Not only startups and consumers are interested in the availability of technology. Despite the geopolitical and economic situation in the world, governments of developed countries are making great efforts to support the industry.
The largest number of hacker attacks is observed in the banking and payments sector. Attackers are interested in the personal data of account holders, payment cards and virtual wallets, PIN codes and other financial information. Therefore, security is the most important aspect that fintech startups focus on. Users’ money must be safely protected. Startups can provide security by creating programs that use artificial intelligence to effectively prevent credential-based attacks.
Digitization of businesses
There is no denying the trend towards digitization of business processes. It is a deep business transformation that involves the use of digital technologies to streamline business processes, increase enterprise’s productivity, and improve customer interactions. One of the main steps of digitalization is to create a more convenient and efficient interaction between the customer and the company. The digitization of a business would be almost impossible without fintech startups.
Increasing popularity of blockchain technology
One of the most promising technologies in the field of security is blockchain technology. It is developing at a rapid pace and offers undeniable advantages. The development of blockchain platforms and smart contracts is therefore one of the most promising areas of digitization of the banking sector today. And the use of smart contracts can reduce the cost of transactions in the procurement of goods, services, and materials, and increase the transparency of the procurement process for regulators.