Fintech is the technologically driven, innovative disruptor of the financial services industry.

The explosive growth of the fintech market signifies the readiness of users to embrace a new approach to digital banking and finance, the availability of technology to provide the infrastructure to make it possible, and the low barriers to entry for companies starting out.

Fintech is one of the fastest-growing industries in the world. Opportunities are there for the taking for entrepreneurs with the skill set and drive to deliver the best financial products and services. It can be a lucrative venture, as the statistics indicate:

●  The fintech industry is set to hit $310 billion this year, with total digital payment transaction value projected to surpass $10.5 trillion by 2025.

●  As a sector, fintech attracts approximately $50 billion in investments each year.

●  More than two-thirds of transactions worldwide are now made online.

●  Fintech areas experiencing the quickest growth include cryptocurrency, blockchain and bitcoin.

As recently as a few years ago, it’s likely that most would only be able to name a handful of fintech firms – perhaps the likes of PayPal, Apple or Monzo. Fast-forward to 2022, and the sector is crowded with new players, from Stripe to Revolut to Klarna, with the convenience and enhanced user experience of mobile banking, e-wallets and online payments now commonplace.

Fintech has changed how the global population engages with any number of financial products, from credit cards and bank accounts to mobile apps and other software.

Launching a fintech start-up

Fierce competition from a flood of other fintech start-ups, and the sheer scale and power of established industry giants and more-traditional banks, mean that setting up a fintech company can require more focused attention than other types of businesses.

Mint Formations, which specialise in supporting newly formed businesses and start-ups, offer some pointers for fintech entrepreneurs who are starting out:

●  Identify a niche. What is the target market and what are the issues or pain-points a business is seeking to resolve? Is the model focused on lending, personal finance, money transfers, e-commerce, equity financing, insurance, consumer banking, or something else? Does the concept offer a minimum viable product (MVP)? Nova Credit, for example, assesses alternative data points to offer alternative credit scoring options, while Robinhood enables investors to trade for free in exchange for data in the asset management space. Fintech products and services should, ideally, be focused on a specific audience, whether this is defined by region or target audience demographic. Many start-ups launch in local markets before breaking into international markets when more established. Conducting market research can help to narrow down potential options.

●  Understand the regulations. Banking and financial services are tightly bound by regulations; while highly necessary, this can make it a tougher industry in which to launch a fintech business. Fintech founders must be aware of any regulations in regions they seek to operate in, and possess a solid understanding of how such laws – for example, those which protect against fraud – may impact business operations.

●  Hire the right people. While an entrepreneur may have a comprehensive and concrete understanding of the financial industry, it requires the right team – with the right technical expertise – to develop, launch and maintain a successful fintech product. Making sure the right skills and know-how are available to feed into each area of the business is key for a new product to be successful.

●  Secure funding. Acquiring the money to get a start-up off the ground, and keeping it operational post-launch, is the preoccupation of most fintech company leaders. Starting out in fintech is expensive, finding the right talent is expensive, and creating a high-quality new product is expensive. Fintech app development and software development, for example, is incredibly costly. Securing the involvement of investors and venture capitalists in backing a start-up can ensure that quality doesn’t suffer and routes to market are simpler.

How to scale a fintech start-up

So, you’ve launched – what next? How do small businesses expand into established service providers?

As of April 2022, there were 473 fintech unicorns globally – start-ups with valuations that exceed $1 billion. While the majority of fintech services exist outside of the ‘Unicorn Club’, there are still some tried-and-tested methods for growing an early-stage business. It pays to look ahead to how a business model will work in the future.

Diversifying funding can boost the robust development and expansion of a start-up. Where seed funding, angel investment or crowdfunding is in short supply, grants, accelerator programmes, partnerships and public financing all offer viable alternative sources of capital in the early stages. Alternatively, businesses in later stages may turn to venture capital mega-rounds.

Be aware that scaling requires considerable resources. As well as capital, expansion relies on time, the labour of development teams and others, and commitment. Entrepreneurs will need to dedicate resources to identifying sources of funding, sourcing potential partners, building infrastructure, mapping budgets and strategy, troubleshooting issues, and more.

Ensure that infrastructure is resilient, which may mean enlisting the services of custom software companies. Otherwise, tasks such as migrating databases to cloud systems and patching up tech stacks can quickly become burdensome, costly and time-consuming. Working with a service provider who can find solutions to any issues, and who support start-ups to achieve their growth projections without astronomical costs, can be transformative.

Capitalise on automation where possible. Artificial intelligence can be the key to considerable cost savings – from chatbots to big data harvesting and algorithms. Fintech start-ups should embrace the technology available to them, investing in appropriate CRM software to optimise automation efforts. Smaller tasks, such as data management and tracking marketing efforts, can all be streamlined for efficiency.

Additionally, start-up founders and teams may want to balance efforts between acquisition and retention, invest in the best possible security to support GDPR and cybersecurity efforts, and develop back-up plans to enhance overall scaling.

Understand the inner workings of fintech companies and use them to business advantage

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• This article was provided courtesy of the University of the Commonwealth Caribbean (UCC)