How to set up a fintech company (and profit from the financial revolution)

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Date: 29 July 2022

A women develops her fintech sart up idea

In the US, entrepreneurs typically want to get into the traditional tech sector. Everyone is looking for opportunities to build new businesses on top of existing infrastructure.

In the UK, though, the focus is slightly different. While there is an emerging tech sector, the country's natural strength is finance. Entrepreneurs (who have often had careers in big City of London banks) are looking to build the nation's prowess in this area, creating a banking system fit for the 21st century .

In this post, we discuss what you need to know to create a top-notch fintech firm. You'll learn how to generate an idea, validate it, ensure that you comply with regulations, and develop software or apps that deliver value to customers.

Develop your idea

Before you set up a company or engage in any trading, you'll need to come up with an idea. It'll have to be something that stands up to scrutiny and offers real value to your target customers.

Start by asking the right questions. For instance, ask whether there is a cheaper or better way of doing something in the finance industry. Alternatively, ask if there are ways to improve an existing product or make payment systems more accessible.

Once you have the questions right, the answers often quickly follow, particularly if you have experience in the industry. There needs to be a pain point for consumers that you solve or a new product that makes their life more convenient, sidestepping traditional banking.

Test whether your idea makes sense

Entrepreneurs develop theoretical ideas all the time. Unfortunately, they don't always make practical sense. What looks good on paper might not work in reality.

That's why you'll need to validate your idea first before committing any capital .

Here are some of the things that you should do:

  • Research the idea on Google, checking to see whether anyone is already doing it and if it's successful.
  • Check to see whether there is demand for the concept. Look for forums comments or search trends that indicate that people are seeking a solution that the market doesn't currently provide.
  • Check to see whether the product you want to sell is trendy right now. Fashionable ideas have momentum, helping you get your timing right in entering the market.
  • Look on the app store to see if anyone is doing something similar. If they are successful or unsuccessful, find out why. Trial existing solutions to see where they fail and how you could improve.

Categorise your idea into a niche

Once you have an idea, you'll want to put it into a niche that makes it more investable. Venture capitalists and investors will want to see that you've identified your target market correctly before ploughing capital into your ideas.

Niches and categories include:

  • New banking apps that offer more convenient services than traditional banks.
  • Apps that facilitate lending, either from official capital owners to borrowers, or peer-to-peer.
  • Payment apps and services that make payments easier.
  • International money transfer services.
  • Smart insurance services that use artificial intelligence to measure risk and handle claims.
  • Trading apps that let audiences buy and sell financial securities.
  • Fundraising apps for charities and good causes.

Make sure you comply with regulations

Once you have your idea and market positioning sorted, you'll need to meet various regulatory requirements. The UK's banking sector is a relatively free market. However, the country still applies considerable regulations.

For instance, fintech start ups must comply with sweeping GDPR regulations. They must protect customer data, declare when they use personal data, and ask clients for permission when using it.

Financial services businesses must also sign up for the LEI Register. This service gives them a unique barcode or number that identifies them as a party to financial transactions. This way, regulators can track their activities and international dealing, improving transparency.

Following all regulations from the get-go is challenging, purely because there are so many of them. Therefore, you may want to hire compliance specialists from different fields to give you an operating structure you can use to remain within the law going forward.

Find a development team

If you already have an in-house development team, you can skip this step. If you don't, though, you'll need to pay close attention. Finding a good development team that understands your needs is extremely challenging.

Word-of-mouth is the best way to find a suitable developer. Liaising with a fintech firm that's already completed a similar project might be the best approach.

If you don't have deep or wide-ranging network connections, then you'll need to rely on Google search. Look for developers who showcase their portfolios online and who've already worked with fintech start ups in the past. Look at their work and ask whether they have the skills to build the kind of functionality you want.

When rating various developers, compare them across the following dimensions:

  • hourly or project rates
  • the number of reviews and review score
  • location (are they geographically close to you or not?)
  • staff strength

Begin the development phase

Once you've chosen a developer, you'll need to begin the development phase. Most fintech companies try to build a minimum viable product (MVP) and get it out to market as early as they possibly can.

You'll notice that as you start developing your product , you'll learn more about your target market, the shortcomings of your approach, and how the software could be improved. Therefore, most fintech companies adopt agile approaches of continuous improvement and auditing of their progress.

During the discovery phase, you'll need to "know your customer" and conduct extensive market and competitor analysis. You'll also need to think carefully about your corporate goals and what really matters to your start ups. Thrashing these out early is better than to trying to figure them out later.

You'll also want to conduct extensive testing of your product at regular intervals, including after launch. This includes testing the following elements:

  • mobile usability
  • business relevance
  • UI and UX
  • quality and speed
  • frontend engagement
  • call to action effectiveness

Top fintech companies launch their MVP and then make continual adjustments to improve them. They also consider cybersecurity issues as they move forward.

Copyright 2022. Article made possible by site supporter Jeremy Bowler.

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