How to start a FinTech company – What entrepreneurs must know when building a startup

Sudeep Srivastava January 6, 2023

We have reached a point where people must use their laptops and smartphones to go through their daily routines. Its usage extends to payments and banking being done digitally through apps. It allows people to manage their personal finances, trade cryptocurrencies, and even invest in international businesses through the convenience of an app. Starting a fintech company can give you more audience than a traditional financial institution.

With the pandemic, the attention shifted to digital payments even more. The global fintech market size hit $110.57 billion in 2020. It is growing at a CAGR of 20.3% between 2021-2030 and is predicted to reach $698.48 by 2030. The adoption rate of fintech apps is so rapid that the number of fintech startups has tripled in the last two years. In 2018, almost 70% of senior bank executives saw a collaboration with fintech startups as an important opportunity for traditional banks. Thus, there has also been a rise in the value of global investment in fintech. It reached up to $226.7 billion in 2021.

If these numbers impress you, let us discuss how you can complete your fintech startup business plan.

Startups revolutionizing the Fintech sector

Let us take a look at some companies in the industry that are doing well in their niche.

Stripe

Stripe deals in online payments and rose funding of $478.7M across nine rounds.

Mint

Mint deals in personal finance management and rose funding of about $31M across five rounds.

Robinhood

It deals in investment and trading and rose funding of $539M across five rounds.

Coinbase

Coinbase works for digital currency exchange and rose funding of $225.3M in 8 rounds.

Revolut

It works as a ‘neobank’ and rose funding of $1.7B in 7 rounds.

Now that we have seen the major fintech startups that are reaching great heights with their success stories, let’s look into the steps needed to create a fintech startup.

How to build a fintech startup?

While building a fintech startup, it is crucial to consider the necessity of making your fintech business financially resilient. This helps to combat the rising complexities of financial regulations and systems. Now let us dive into the steps you must follow to build a financial technology startup.

Know the regulations

Banking and fintech are highly regulated sectors. Therefore, you must be familiar with every aspect of this extremely complicated industry, including the governing bodies, legislation, restrictions, and criteria.

The General Data Protection Regulation (GDPR) covers all companies that interact with client data. For businesses in the finance sector, this policy is just the beginning. Anti-money laundering (AML) guidelines, Know Your Customer (KYC) compliance standards, and adherence to the PCI DSS are typical fintech regulations in the US. Additionally, you might have to use conventional authentication methods like digital certificates.

Remember, wherever there is money, there are laws and regulations. Make sure your proposal complies with existing laws before starting any work to guarantee that your customers’ money is secure in your system and that their identities are reliably secured. To keep compliance issues under control, prepare to put regular legal auditing practices into place.

Choose your niche carefully

The need for all types of fintech software is currently steadily increasing. However, digital payments, personal finance management, and alternative financing are the fastest-growing market categories. The use of investing solutions has also increased dramatically.

Here are a few of the several fintech subdomains to take into account:

  • Investment management
  • Personal financial management
  • Global money transfers
  • Loans and advances
  • Bitcoin and blockchain-based technologies
  • Crowdfunding

Your product can target a particular audience, such as a nation or demography, depending on your subdomain. It’s preferable to start your firm locally and then grow internationally.

Establish a competitive advantage

Once you’ve decided on a niche, research your competitors. A thorough knowledge of the market and your competitors can assist you in identifying a distinctive quality or competitive advantage that will set your product apart from similar products already on the market.

It could be a brand-new product that targets a narrow market (such as financial services for the unbanked), or it could just be an upgrade to an already excellent service (e.g., fast and simple mobile banking).

The business potential in fintech is quite broad at first appearance. However, well-known companies like Microsoft and a number of extraordinarily lucrative businesses (like Stripe and Coinbase) dominate the market. In any case, you should stake your idea on flawless execution if you want to succeed in the fintech sector.

Build your team with the right people

One of the many requirements for a successful company is having the right individuals on your team. However, it could be difficult to draw in developers and expand your team locally, particularly if your area has a small talent pool.

To develop a usable solution in a constrained time frame, your team needs to be knowledgeable in both technology and finance. Consider outsourcing your development tasks to a reputable software development firm like Appinventiv. Your partner development company must have a proven track record of creating effective startup solutions.

By doing this, you’ll be able to make significant financial savings and redirect your managerial attention to marketing and product development.

Prioritize data security

Verify the security of your business along with the encryption and cloud storage of all important data. As a fintech startup, this should be your most urgent requirement. Fintech security problems could cause the disclosure of sensitive information that one could exploit for theft or fraud.

Run thorough tests to inspect any vulnerabilities to assure your company’s top-notch fintech cyber security. Apply transport layer security (TLS) to all network connections, stop unauthorized API connections, and use an HTTPS SSL certificate to secure your clients’ information.

You could also use a cloud platform like AWS. It offers a strong defense against DDoS assaults and backs up the data to go back online in case of any network outages. You must also put in place multi-step authentication on the client’s end and have users use strong, frequently-changing passwords.

Obtain funds

If your personal resources are limited (which they typically are), you must first secure external investment before launching a financial firm. Your fintech startup funding can come from close friends, family, or seed investors. In order to get the funding, you need to move to the MVP stage, where you’ll be presenting your firm to more experienced investors for future development and expansion.

[Bonus Read: How to get investors for your mobile app startups?]

Set your MVP’s scope

The shortest possible time between creating the first line of code and onboarding your first users should be your top priority as a startup entrepreneur. In order to do that, you must carefully define the scope of your MVP (Minimum Viable Product), which should be minimal yet provide users with enough features and capabilities to acquire a feel for your business.

Quickly reaching the MVP stage allows you to cut costs, reduce time to market, and start testing and responding to user feedback much earlier, all of which naturally improve your chances of long-term success.

Product launch and improvements

After you have gotten your MVP approved, the next step is to release your product in the market.

You will face fierce competition as a new fintech company but do not get intimidated. Keep concentrating on improving your product for a better user experience and stronger cybersecurity.

Even if customers think your product is excellent, you should constantly test new concepts to improve it.

Major technologies required for building a Fintech startup

To start a fintech company, you should be updated about the newest technology trends that you can incorporate into your business. The better the technology is, the better you will be able to deliver to your customers. Here is a list of the basic but essential technologies you will need to get started with your Fintech business.

Artificial intelligence

AI recognizes and analyzes real-time data, which then recommends the best course of action. Because of this reason, AI has several applications in resolving financial issues. For instance, it can be used to identify fraudulent activity in digital banking, insurance, etc.

Blockchain

Blockchain technology will help you build a reliable and transparent fintech product. It produces a time-stamped series of uneditable data that you cannot delete. Plus, it saves in a decentralized manner.

Cybersecurity

Cybersecurity is a primary concern for every fintech company. Before starting a fintech startup, you must be cautious about how you will handle and store sensitive customer data.

To reduce security lapses and data theft, your team should use various security measures.

Microservices

An application can be organized as a collection of connected services using microservices. It creates a distributed system with decentralized data management. You can quickly incorporate any new solution into your infrastructure.

[Also Read: How will Fintech Affect Your Business?]

How can Appinventiv help you build your own Fintech startup?

Looking for a finance software development company to execute your fintech startup ideas? Appinventiv can help you. We have been in the software development industry for the last few years and have had the opportunity to create digital solutions for multiple international firms and Fortune 500 companies. We work by listening to our client’s problems first and then directing our solutions.

Appinventiv has created successful fintech solutions in the past, one of them being for Asian Bank. We focused our efforts on making them the next big thing in the consumer finance space and were able to curate an app that received 250k+ downloads. Since our team was able to identify and resolve critical challenges in the process, the app has received over 50k+ cryptocurrency transactions to date.

On that note, we are happy to begin your journey of starting a fintech company. We will help turn your idea into a successful project without any hassle. So, get in touch with us today!

FAQs

Q. How are banks using fintech?

A. Banks are utilizing financial technology to simplify their customers’ access to cash and credit. Digital technologies like chatbots, smartphone apps, and machine learning algorithms are being used to give customers immediate access to their funds and improve user experience.

The fintech apps provide customers with text- and voice-enabled platforms that can perform many banking functions. Additionally, they can provide comprehensive answers to inquiries and requests. Several banks have created AI-powered virtual assistants for this reason.

Q. Will fintech startups substitute or replace banks?

A. Compared to traditional financial institutions, fintech startups provide a number of benefits that enable operators to be more creative and provide services to their clients more rapidly and affordably. Fintech has been able to shake up and disrupt the financial services sector as a result of this.

But it probably won’t replace banks. One reason is that clients have a far higher level of trust and loyalty to banks and other well-established financial institutions, which has frequently been developed over many years.

Additionally, cooperation between conventional banks and fintech firms is very popular in the financial sector. While the fintech companies expand their customer base and acquire access to an existing customer base, the banks gain technology and new ways to deliver services.

Q. How to build a fintech startup?

A. If you are planning to build a fintech company, below are the key steps that you need to consider for getting started – 

– Know the regulations

– Choose your niche carefully

– Establish a competitive advantage

– Build your team with the right people

– Prioritize data security

– Obtain funds

– Set your MVP’s scope

– Product launch and improvements

THE AUTHOR
Sudeep Srivastava
Co-Founder and Director
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