Over the last month or so, I've been looking back and asking myself - "What does it take to start a (great) FinTech company?". And I struggled to distinguish between what can be related to any kind of startup, and what is specific about FinTech. Luckily, I happened to be in the right place at the right time - a truly remarkable session on "How to launch a FinTech product" contributed a lot towards getting my thoughts straight.
We will return to this session in a moment, but first - here are 7 tips for launching a successful FinTech venture.
1. Focus on something boring and expensive
The core idea behind almost every great FinTech product is to replace an existing service or solution, such that the new alternative is at least several times better and more convenient for the user. Just a marginal improvement most likely won't be enough for achieving groundbreaking success.
Google didn't disrupt the search engine industry by just tweaking and slightly improving what others already did. TransferWise didn't become a Billion dollar company by allowing people to send money abroad just a tiny bit cheaper.
In order to achieve this level of success, focus on something that really, truly sucks. Identify financial services and products that are slow, that are expensive, lack transparency, or are obviously outdated in some other way. No matter how great you think your idea is - if it is only 10%, not 10 times better than an already existing solution, dominating the market is going to be much more of a mission impossible than it already is!
At Viventor, we are revolutionizing investing through crowdfunding. Bank deposits offer hilarious returns; you have little to no transparency or control over your investments, and the costs practically balance out the earnings. For other types of investing, there are high knowledge requirements, and even bigger commissions.
2. Stay on good terms with incumbents
We live in an era when banks and "old school" financial service providers are undoubtedly challenged like never before. And yet it is sort of a "ying-yang situation". FinTech companies are becoming more of a threat to banks with every passing day. They are pushing banks further down the inevitable path of change. But FinTechs cannot survive without the banking ecosystem either. Certainly, not yet.
There are very few ventures that actually can and do well on their own, with some other companies being on their path towards achieving independence. However, the market has shown that there is a great upside in cooperation between FinTechs and banks. And the upside can certainly be much greater than what we have seen so far. What banks lack in speed and efficiency due to IT legacy and other factors, they make up for in several other ways, such as enormous amounts of financial capital and clients at their disposal, as well as a fair share of the finest specialists in finance still remaining in the banking industry.
3. But be ready to attack
The existing financial infrastructure is indeed pivotal for tons of FinTech ventures. There is practically no solid international alternative for depositing cash other than bank offices and ATM's. No company yet offers a tested, proven multi-functional alternative to a standard bank account.
Keeping in mind that banks and other incumbents are vital for your FinTech to succeed, be ready to punch above your weight. Do constantly challenge the existing, outdated solution, and make sure you are heard. Emphasize the solutions for inherent problems you are proposing, the benefits for consumers in using your alternative.
We live in a time when sending a bold message to mass audience is less sophisticated than ever. Social media, "below-the-line" channels, connections and other online tools - take that, add appropriate dose of wittiness and creativity, and strike!
4. Think mobile
Not only PayPal,Stripe and Square, but also wildly successful brands like Apple, Google, Facebook and even Snapchat are now offering mobile payment solutions in their respective product suites. From Prosper and OnDeck in the US to 4Finance and Spotcap in Europe - practically every thriving non-bank lender has understood the importance of mobile when it comes to online lending, and acted accordingly.
Setting already proven services aside, we can see that other parts of the FinTech ecosystem are now being reshaped with the help of mobile. Take Number26 and Atom in mobile banking or FinanceFox in InsurTech as examples.
27% of people with smartphones are already using mobile payments. The number of mobile banking users is estimated to be approaching 2 billion in less than 3 years. Forget the numbers for a moment, take out your phone, and check your bank's mobile application. Pretty solid, right? To summarize, whether or not you should go mobile with your product ought not to be a question.
5. Build relationships wisely
Partnerships are crucial in every business, and FinTech is no exception. In most cases, establishing relationships will not be significant while getting your venture towards hitting the first milestones. The real effect of relationships kicks in further down the road.
FinTech companies are good at replacing particular services that are outdated. However, to achieve the greater good of creating a whole new Financial Ecosystem, bundling, tight collaboration, platforms, and other types of partnerships will be essential.
Keep that in mind, but also remember that you won't be able to partner with everyone. Getting and nurturing the right partnerships is a substantial factor in the sustainable success of your FinTech.
Alignment of company values and mutual chemistry between the founders are crucial. Thinking long-term over running for short-term gains shows the scope of ambition and mind for strategy. If you have a proposal for a potential partner only in one year, still go and meet them now! Develop the relationship, share your vision, and start with something tangible instead of a cold call when the time comes.
P.S. If you are aware of a secret formula for nailing this, please do share it with me.
6. Stay regulated, stay lean
Welcome to the world of finance - the regulators do have an important role to play here. And, unless you are subject to plain injustice, building good relations with the authorities is not the worst idea.
If you are indeed onto something groundbreaking, and the solution is innovative to its core, you are likely to enjoy a good period of certain freedom. Apart from complying with general acts like "Anti-Money Laundering" and "Know Your Customer" regulations, it will take some time before your particular niche will "deserve" a tailored set of rules. A few years, most likely.
Comply with what is fair, but don't become "overregulated" and agree to every "expert opinion from the authorities". Remember that your main goal is to be efficient at fighting a persistent problem in the financial industry. Not every regulator is supportive to innovation, and Uber is a bold example of bringing the fight to them.
Remember: first comes innovation, then follows regulation.
7. You only get one shot at trust
A new messaging app that you tried did not send this message of yours. That new taxi application did not have any cabs available when you needed one. A player that seemed like a whole new music listening experience won't load for your evening run.
All of them are disappointing situations, right? And then there is a new investing tool you tried with 50 Euros, which lost half of your money due to a system bug, and consumed another 3 Euros in commission. Which of the four is least likely to restore your trust?
In FinTech, trust is a one-time thing. People are not only devoting their time, but they are also committing another tangible resource: money. Therefore, you must treat every single customer with more care and love than other companies do.
Mistakes and errors are inevitable, and they will come for you one way or another. And to minimize the potential downside you can:
Be exceptional when it comes to communication and transparency. Admit your mistakes, explain their causes, and walk your customers through how you will solve them.
Test, test, and test once more prior launching. Going live and switching to real money is exciting and scary at the same time.
Value and reward your "champions". The users that have been with you since early days are your greatest value. Not only do they play a tremendous role in turning your idea into reality, but also are likely to be most understanding about the failures along the way.
You can raise tons of money and spend it on building an image of a safe, trustworthy brand, hire a celebrity to help you creating this image, or think of a thousand other ideas. But the single most efficient way of building trust in your brand is through great performance and communication.
Remarks
The remarkable session I attended and mentioned before took place during Pioneers Festival in Vienna, and a lot of credit goes to the two gentlemen running it. Jack Harris from Wirecard, a global powerhouse in electronic payments, and Tom Foster from Curve, a revolutionary solution putting all your cards into one, hosted the session. Do go and check out these two great companies!
