The FinTech industry, as its name suggests, combines finance and technology.
It certainly sounds like it could be a lucrative venture, doesn’t it?
Then again, it also means you’ll need to understand both innovative AI and the age-old business of finance.
And exactly how the two can be brought together to from a go-ahead FinTech company.
What is FinTech? A FinTech definition
Simply put, FinTech companies provide computer or AI technology and programmes used to support or enable financial and banking services.
In fact, it’s also improving business and customer transactions as a whole, granting faster and more reliable access to capital, optimising monetary services, and streamlining cashflow.
FinTech companies can, for instance, vastly speed up the collection and validation processes of a business, with the ability to determine qualifications within minutes.
FinTech examples & the FinTech industry
FinTech is every bit as wide as the financial service sector.
For example, there are payments, billing, advice, business tools, and integration with other financial systems.
Then there’s the different financial industries: financing, asset management, capital markets, digital currencies, SME financing, etc.
FinTech has more or less also added other sectors to these, such as crowdlending and robo-advisor.
It’s one of the fastest-growing areas for venture capitalists.
To stay ahead of the game, financial institutions have been forced to develop their own tech capabilities.
Many have acquired or partnered with promising FinTech startups.
In an emerging industry such as Fintech, there’s a great deal of potential to form ground-breaking businesses.
But as it is an emerging industry, FinTech startups require careful planning and thought.
FinTech startups: Finding the Funding
Naturally, FinTech startups need finance, the initial funding that’s going to underpin their creation.
Any new business is faced with capitalisation and operating expenses. But in the case of FinTech startups, they have the extra costs of integrating with traditional institutions such as banks and brokerages.
Moreover, FinTech startups face competition in hiring the talent they need, as traditional institutions increasingly poach FinTech talent for themselves.
FinTech startups: Forging a Team
FinTech startups need a team bringing together expertise from a number of fields: financial, technological and business know-how are all essential requirements.
No one can be expected to be an expert in every one of these fields. Teamwork is a priority, as the people you’re working with will determine how successful the new venture becomes.
Even so, even with the most knowledgeable team in place, you may need to bring in legal help to deal with the complex compliance requirements all FinTech startups face.
FinTech startups: Dealing with Regulations
In any area of financial services, regulation is a key topic.
FinTech startups have only added to the glut of laws, due to the new models they’re operating under, such as peer-to-peer lending.
Basically, FinTech startups need to get approval before launching as a business. The processes involved can naturally delay or even lead to the cancellation of any planned product launch.
The amount of compliance required often involves the need for accountants and lawyers.
And certainly, FinTech startups need to continuously and cautiously monitor any subsequent changes in the regulations.
FinTech startups: Seeking Solutions
Of course, potential clients are seeking out the FinTech startups offering truly game changing solutions.
The most successful FinTech startups focus on solving a typical challenge faced by potential clients, fitting their solutions around resolving it.
FinTech startups should aim to launch a product that will immediately find its targeted client base.
Yet as the technologies FinTech startups are leveraging are in a constant state of innovational flux, the ability to deliver or change direction quickly is essential.
FinTech startups: Choosing Technology
FinTech startups, particularly those aiming to be ahead of the curve, are in many cases effectively betting on the technologies they’ve chosen to power their service.
Previously high barriers for development have ben lowered now machine learning and analytics engines are being offered as a service by cloud platform providers.
But technology such as Blockchain, a decentralised way of exchanging value online, has yet to reach maturity.
It is Blockchain, however, that traditional banks tend to fear more than anything else.
And the more successful FinTech startups are those creating more than one product or service that clients will buy into.
FinTech startups: Customer Trust
Potential clients will always be sceptical of any new company or service.
But this is especially the case when it comes to financial transactions, particularly when they’re taking place online.
Cyberattacks and data breaches are being reported daily.
Trust, then, is the FinTech startups’ most valuable asset.
Prospects need to feel reassured that all possible security measures are in place, safeguarding their business.
FinTech startups: Competition from Institutions
Banks have suffered a growing disruption of their business models as FinTech startups have stolen the march on them.
How much longer will they suffer it?
Banks still hold the assets, and they’re fighting back by drawing on AI technologies to enhance their own services.
Yet it isn’t the banks as institutions that are under threat.
It the way we do banking that’s inevitably changing.
Despite the difficulties of taking into account the different regulatory systems in each country, FinTech startups need to offer universal solutions that can be accessed and used across borders.
FinTech startups in China and the US have huge domestic markets to draw on, but those formed in other countries – even European ones – can only reach critical size by expanding globally.
As well as expertise and creativity, FinTech startups need a great deal of tenacity amongst their many attributes.
Keeping up with FinTech news
The pioneers of FinTech startups have enabled new ventures to follow.
The challenge for new FinTech startups is to offer a breakthrough service, rather than simply copying those who’ve gone before them.
The original startups are now established FinTech companies. The goal, then, is to offer new ways of solving the challenges potential clients face.
The FinTech industry is a thriving and constantly changing business, utilising technologies that are themselves being improved and optimised at a phenomenal rate.
Is there an easy way to keep up with the very latest FinTech news?
You can ensure you’re kept up to date by regularly exploring these articles.