Quality and marketing techniques are the core fundamentals of building a successful fintech startup. Although many factors determine the success or failure of a fintech startup, it is through pinpoint strategies that a new fintech company can survive in an increasingly saturated market. A deeper understanding of client needs, interests, hobbies, and involvement in social channels must be the prime focus of fintech companies, especially startups.
The number of fintech companies springing up across the world is nothing short of astonishing. As per a StatisticaOpens a new window report, considering the U.S., Europe, MEA, and Asia Pacific regions, more than 20,000 companies are operating in this sector as of 2020. These cover insurance, banking, retail, education, investment management, and cryptocurrency companies.Â
Over the next two years, the global fintech market is projected to be valued at around $310 billion, with competition only getting tougher for market players. According to a reportOpens a new window published by Medici, almost 90% of fintech startups fail to progress beyond the seed stage. This proves the low success rate in this highly competitive market. It also shows that a fintech startup needs intricate planning and execution to have a shot at success.
What Does Starting a Fintech Company Entail?
Financial technology is a digital world of processing monetary transactions. Fintech is designed to improve, automate, and deliver various financial services. It is one of the most challenging industries that require a lot of effort, expertise, creativity, and grit to be successful. The right people with the required technical expertise and innovative ideas to solve the customer’s financial issues will go a long way in determining your startup’s success.Â
Marketing techniques determine the core foundation phase of a startup. There are usually four metrics to be considered — average value per customer, virality coefficient, percentage of active users, and cost per customer acquisition. Building trust and loyalty with users should be the company’s main priority — it is something that can only be earned by focusing on helping users rather than sales. This can be done cost-effectively through social channels and by building a user database.Â
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Another way to do this is through a rewards system where consumers can reap the benefits of their association. Complying with security protocols is another important component that a fintech startup needs to keep in mind. There are different standards such as GDPR, PCI DSS, PSD2, GPG13, and eIDAS which are mandatory for every fintech company to abide by.
The services of fintech companies differ from organization to organization. It is advisable to define the services that your startup aims to provide. Based on the type of services and product to be designed, the startup investment needs to be carefully assessed. Performing code reviews and applying pair programming can help your product detect minute issues and remain bug-free. Four main encryption algorithms which are mandatory for data encryption of sensitive data include Advanced Encryption Standard (AES), Rivest-Shamir-Adleman (RSA), Triple Data Encryption Standard (TripleDES), and Twofish. Different sets of data can be encrypted using these algorithms, which have their own set of specific usage and peculiarity.Â
Also Read: The Role of Peer-to-Peer Lending in Fintech
5 Tips to Succeed as a Fintech Startup
If you want to succeed as a fintech company, here are five tips that will help you achieve your goal.
1. Gauge and measure metrics periodically
For a successful fintech startup, there are six metrics to be considered — average value, user acquisition, virality coefficient and active user percentage, scalability, and increasing ROI. Virality coefficient calculates the likelihood of the product being recommended, increases ROI, and reduces overhead costs needed per acquisition. Measuring these metrics periodically is necessary for any fintech startup to grow. It lays a strong foundation for the future development of the organization.
2. Make Customer-centric decisions
Customers are integral for any business to take a form and succeed. A company should maintain a close connection with its customers, and this should continue to be one of the central business strategies throughout. However, winning customer trust is not very easy in the financial business, as it involves data and financial security.Â
It is the organization’s responsibility to provide secure services that help customers manage their finances in the best manner. It should also abide by all the necessary regulations for a fintech company. All decisions must be planned to keep the customer’s needs in mind, and continuous communication should be maintained with all customers. In short, instead of concentrating on sales growth, ensure that all business strategies are aimed at customer satisfaction.Â
Also Read: Will 2021 Revolutionize Digital Lending?
3. Follow technology trends
Technology has helped transform complex business ideas into simpler and more secure solutions. Digital financial services such as mobile banking, international money transfer, and cryptocurrency are a few major services that have been designed to facilitate easier transactions. A fintech startup will also require the latest technology implementation, such as artificial intelligence to cater to customer-centric services.
Fintech startups should have state-of-the-art data security solutions as they are highly vulnerable to security attacks. Dealing with financial data, passwords, bank accounts, and identity information in the size of terabytes makes it imperative that they use end-to-end security integration.Â
As per Data Breach’s Q3 2019 report, fintech companies are listed #2 as far as data breaches are concerned. Data ownership is the most common form of data integration, where a fintech company has control over creating, modifying, removing, and sharing access with others if needed. The company needs to form a data ownership team with a group of individuals who are highly knowledgeable about data and legal regulations.
4. Leverage Social networking and automation
Social networks are an essential tool of development for fintech brands. Even though most companies have deployed chatbots and artificial intelligence, human intervention is the X factor in effective communication. Humans can speak to clients, understand their concerns, and provide quick resolutions in a more convincing manner. Social networks are key endpoints through which customers can connect with your organization.
Machine learning and artificial learning are also vastly used in the fintech space. A successful machine learning model can help reach a broader target audience and meet customer needs more effectively.
Also Read: Fintech Regulations to Expect in 2021
5. Employ referral programs
Creativity in the form of advanced technological approaches and prioritized innovation has been a differentiating point in fintech startups. There have been various instances of out-of-the-box ideas such as radical transparency. An open and honest gathering of opinions without any conditions and terms was highly effective. There is always a fundamental issue where fintech has been thought of treating customers as accounts, which can be changed through radical transparency, where they are treated as people with needs and aspirations.
Referral programs are a tried-and-tested method of enhancing the appeal of a brand, and satisfied customers would be the perfect brand ambassadors for your startup. The continuous inflow of new customers can be sustained through effective referral programs. Customer loyalty can also be gauged through referrals, and rewarding such customers is equally important.
In conclusion
With 5G and IoT devices gaining prominence, the role of fintech will only get bigger as time goes by. However, trying to scale up too quickly can be detrimental to your long-term goals. Understanding your customers’ needs and values is important so that you don’t overpromise and under deliver.Â
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