Ultimate Guide on How to Start a Fintech Startup

Fintech or financial technology has become one of the most popular ideas for startups today. In this era of digital transformation solutions, everything has shifted online, and financial businesses are no different. To offer a convenient experience to customers, almost every financial organization and bank are digitizing themselves.

As a result, people can transact online seamlessly, do online shopping, purchase online services, make subscriptions, and do much more. No longer do people need to visit banks to deposit money or transfer amounts to others. Everything can be done at your fingertips within a few clicks.

In addition, there are online platforms to buy and sell cryptocurrencies like Bitcoin & Ethereum, invest in the stock market to buy shares, raise funds for startups, manage personal finances, take loans, mortgages, etc. All these have become possible because of financial technology.

As a result, the number of fintech startups arriving in the market is increasing rapidly. If you are looking forward to building a fintech app, you must know exactly what is a fintech startup, how to start a profitable fintech business, and important things to consider. In this write-up, you will find the answer to all such questions.

What is a Fintech Startup?

A startup that uses modern technologies like cloud computing, artificial intelligence (AI), big data, and more to create solutions that cater to financial requirements is known as a fintech startup.

Basically, the role of a fintech startup is to innovate the traditional financial solutions to improve customer experience, bring new ideas that can benefit people, and transform businesses.

For instance, a mobile banking application can make it convenient for users to transact online, pay online to eCommerce sites, recharge mobile phones, pay bills, and do much more without having to visit the respective bank. This is one of the top trending fintech startup ideas today.

Almost everyone uses smartphones and internet services today. In such an era, fintech platforms are rising and catering to the needs of the users.

Important Fintech Statistics You Must Know

One question that comes to mind when investing in fintech business ideas is whether this market is growing or not. What is the future of the fintech market? Will the investment be worthwhile?

On that front, the stats show that the financial technology market has been growing at a fast pace over the last few years, and this growth is expected to accelerate further over the coming many years.

As per Statista, the number of fintech businesses is growing significantly. For instance, there were 5,686 fintech startups in the US in 2018, which reached 10,755 in 2021.

According to Research And Markets, the value of the fintech market around the world was $2767 billion in 2016. It is expected to witness a growth of 27.5% CAGR and reach $31,503 billion by 2026.

Juniper report says that 53% of the global population will be using digital banking solutions by 2026.

Things to Know Before Starting a Fintech Startup in 2022

For those wondering how to start a fintech startup, here are the essential steps to consider:

1. Find Your Fintech Business Niche

This is the first towards kickstarting a fintech startup, as with almost any other business. You need to decide which niche to choose.

Fintech itself has a broad range of business niches or verticals. Before stepping into this market with a business idea, you need to have a crystal clear vision about the niche, target market, as well as the problems that your business is going to address.

For instance, you can choose to develop a cryptocurrency exchange app. This kind of app allows users to buy a cryptocurrency like Bitcoin and Ethereum, sell it whenever wanted, and make profits. You can earn a commission from every transaction made on the app. There are definitely several more ways to monetize it.

Some of the most popular niches in the fintech market include insurtech, crypto exchange, crowdfunding, personal finance management solutions, stock trading, digital wallets, and money lending, just to name a few. 

2. Brainstorm Your USP

Once you have decided on your fintech niche, the next step is to find the competitive advantage or the unique selling point that your business is going to offer. There are numerous similar startups in the market that are providing the same solutions like yours. What will make your startup stand apart from the competitors?

You need to find the answer to this question to attract more users or consumers to your solution. Start with knowing the top competitors in the market. Use their platforms and get a thorough understanding of what they are doing, what are their unique features, how they onboard users, and what they are doing to stay competitive.

For instance, money lending apps provide loans to users without the involvement of banks or financial businesses. The challenge for people is that bank loans are not easier to take, and they check their credibility. Online money lending apps or platforms provide loans without difficult criteria like banks.

Similarly, you need to evaluate what additional you can offer, or what other challenge you can address with your fintech startup.

You Must Follow These Steps to Develop a Feature-Rich Mobile App

3. Understand the Rules & Regulations

The rules and regulations are high and complicated in the financial industry. Hence, you need to be aware of all ifs and buts of the regulations that you need to meet and stay compliant with. There are legal and regulatory authorities, laws, limitations, and needs that you can’t avoid.

For instance, if your target market is European countries or regions, you need to comply with General Data Protection Regulation or GDPR. For fintech startups in the US, meeting the requirements of anti-money laundering (AML) policies is a must.

There are several more regulations like Know Your Customer (KYC), PCI-DSS, etc. Research and understand these regulations properly before stepping into the fintech market. In case you violate any rules and regulations, it can land you into legal disputes and get your business shut down.

4. Build a Team

To become a successful business in the fintech industry, you need a team of skilled and talented people. Your team will be responsible for developing the solution, creating marketing strategies, finding unique and innovative ideas to grow in the market, managing the cash flow, etc.

If you are looking to build a fintech mobile app, you need to choose a fintech app development company. The company will develop the application for you according to your business idea.

Outsourcing some of the core tasks is vital for budding startups because hiring the right talent in the initial phase of your startup app development is a tedious task. For instance, you can outsource web/app development, digital marketing, etc. This not only helps you get the work done with expertise but also saves time and cost of hiring the team. 

5. Go For an MVP (Minimum Viable Product)

MVP or Minimum Viable Product is the basic version of your online platform or mobile application. In the MVP version, it will have just the minimum features and functionalities.

The role of creating an MVP is that you get more clarity about the solution, roll out the app to specific users for testing in real-life, pitch to investors for funding, and focus on the core functionalities.

In addition, the MVP can be developed in less time and at a low cost. Once you have the clarity in vision, and feedback from users and investors, you can then proceed to the final product release. Good companies that offer fintech app solutions help you with both the MVP and final product development. 

6. Raise Funds or Find Investors

Now that you are done with finding the niche, knowing the USP, hiring the team and app development company, and a functional MVP, the next important thing is finding the investors. Fintech startups need significant investment. You need to raise funds to jump into the market.

It is time to pitch your fintech business idea to the investors. For this, create a list of investors who are likely to invest in a fintech startup and send them your idea with full details. Be ready with an excellent presentation, demo of your solution, and monetization strategy.

7. Launch the Business & Keep Innovating

Once you have followed the steps above and found the investors, it is time to hit the market with your innovative fintech startup idea. This market is flourishing and will need your full dedication to ride on the top of the waves.

Observe the analytics of customers, take care of the customer feedback and address their challenges. Keep making your solution more innovative by adding advanced features, and functionalities, and focusing on user experience, to become competitive.

Wrapping Up

These are some of the essential steps that you need to consider to start a fintech startup. Your business idea should be unique, have some USP, enticing user experience, and a skilled workforce who can manage things well and keep your startup innovative and thriving. Laws and regulations are things that you simply can’t ignore.