WiseAlpha's CEO Rezaah Ahmad examines the steps in getting an idea off the ground and into a disruptive financial start-up.
We’re 10 years on from the global financial crisis and 10 years into a fintech revolution which has seen technology and fresh creative thinking breathe new life into the UK’s tired financial system. In spite of widespread innovation and the increasing presence of fintech in consumers’ consciousness, the UK has only one unicorn fintech in the UK posting profits. So, what is next for fintechs in the UK and how can these businesses make their offerings desirable to consumers?
The first step in the lifecycle of a fintech is discerning which of the two main approaches to retail fintech should be adopted. One approach builds on top of existing infrastructures, such as layering onto a bank providing additional services. The other is to build an infrastructure from scratch and then develop your app on top. Although the latter provides a lot more control, it is extremely capital consumptive, especially in the early stages of a company’s growth. In order to establish a thriving and sustainable unicorn fintech, expertise, knowledge and investment need to be strong.
The next crucial step is to secure funding. We live in an era where infrastructure, funding conditions, and strong partnerships are conducive to a start-up’s success. Just ten years ago, e-commerce giants like Amazon came along with low-cost debt centres and accessible infrastructure allowing people to connect. Today £3-5 million allows entrepreneurs to create the product and build the demand. The UK is thriving with over 1,600 fintech firms as a result.
If you want your business to reach the equivalent of the London Stock Exchange, but your starting funds are minimal, securing the right kind of funding is crucial for the success and longevity of your business. One of the best ways to do this is through crowdfunding, specifically equity crowdfunding, which has transformed the growth of the fintech sector over the last decade. This approach has the potential to form the basis of solid growth, so finding the right partner for your business is crucial.
The size of the fintech market is undeniably huge, which makes the importance of strong marketing and successful positioning, key in appealing to investors. In the current climate, investors are often looking for something different, which inevitably means that what makes you attractive to one fund, makes you unattractive to another. It is important to remember that whilst you can’t please everyone, you should define and stick to your brand identity without compromising on your business approach. There are three key things to ask yourself here; who are you pitching to, are they a good fit and why do you want the exposure? Your target audience and potential customer base is a useful resource when building your business model. Gauging public opinions and awareness levels before launching your product can deliver invaluable insights when defining your brand’s identity. Establishing a strong brand identity is a crucial factor on the path to success.
The reality of launching a fintech business doesn’t come without navigating the abundance of regulatory standards enforced within financial services. Innovation within fintech is key and whilst some firms are transforming, the reality is that a business’ transformation can be dependent on how a regulator sets its policy. Subsequently, companies who are subjected to a high-level of scrutiny by the regulator are impacted the most, and ultimately need to be more careful in executing their business model.
Although the UK has one of the friendliest regulatory environments and generally holds a more open attitude to innovation in comparison to other jurisdictions, there is certainly further scope for improvements to ensure the growth and prosperity of the sector. Key developments for this include increased support for businesses that advocate for fintech, along with greater government initiatives to force better transparency and clarity from the regulator. Further coordination between the funding organisations and the regulators could be transformative and would help the wider understanding of fintech.
Looking to the future, fintech businesses will become increasingly part and parcel of everyday life. Offering a unique customer experience will be crucial in the years to come for new fintechs, as original ideas start to become exhausted. The financial profile of an individual is becoming more important and valuable than the individual themselves. Huge social networks like Facebook are selling access to consumer profiles and monetising their customer base through connectivity. Many businesses have already entered the sector with a product that suits the market well, so there will undoubtedly be consolidation along the way. Although we are still in the boom phase for fintechs, the window in which to secure capital will be limited. In order to secure reliable funding, deliver a successful product and stand the test of time, fintechs should enable the smooth delivery of financial services and have a strong consumer focus.