It’s no secret that many startups fail. Even though there is a genuine fintech revolution going on right now, not everyone who jumps on the bandwagon will be successful. The vast majority won’t.
There are obviously many factors that contribute to the success or failure of a given startup. If perspective entrepreneurs could simply and easily discern what makes a fintech company thrive and what makes one fail, no one would fail at all. All entrepreneurs would have to do is follow a checklist. However, it’s not that simple.
That being said, there are some basic criteria that are essential to the success of fintech companies. While adhering to the following list is by no means a guarantee that your company will achieve its goals, taking these factors into consideration will help you start out moving in the right direction.
Identify and Address a Genuine Need
This may seem obvious, but it’s the kind of point that many startup founders often overlook. You shouldn’t take any action until you are certain your business will legitimately serve its customers by addressing an actual need or want that they have.
Luckily, in the realm of fintech, identifying a service that customers actually want isn’t too difficult a task. Many successful fintech companies simply offer convenient alternatives to existing services. Venmo, for example, makes it easier to send money to your friends and loved ones. Robinhood allows users to invest in the stock market via its mobile app – without having to deal with high broker fees. Entrepreneurs like Donald Gayhardt have created companies that make it easier for people to obtain loans online.
Notably, none of these companies invented an entirely new service. People have been sending money, buying stocks, and acquiring loans for some time. However, those tasks have never been as simple as they are now. That’s thanks in part to startups like these.
In fact, in many ways, that’s all a fintech company needs to do to: improve upon an existing service. If the company manages to do it well, it could lead to success.
Establish Effective Security Protocols
Any company that asks users to provide their personal information needs to make sure it protects that information. This is especially important for fintech startups. If your company handles users’ financial information, it’s imperative that users feel their information is safe. It doesn’t matter how hip your marketing is or how convenient your app is. If customers believe they can’t trust you with their financial data, they will never use your service.
Thus, startups should prioritize this aspect of their businesses from the beginning. Don’t wait until you’ve developed your product to start working on security measures. Make sure this is a key component of your overall strategy.
Again, convenience is key when developing a fintech product. Users won’t abandon their current financial services provider just because a new company comes along. They need to feel the new company offers genuine value. Of course, convenience is a vague concept. What exactly makes one service more convenient than another?
There are many answers to that question, but when it comes to fintech, reducing friction is a major part of the equation. Reducing friction is just a fancy way of saying you’re eliminating some of the steps involved in a process.
For example, Venmo reduces friction by letting users send money with the push of a couple buttons. They don’t need to fill out as much personal and financial information as they might have to if they were using an old-fashioned wire transfer service.
Similarly, Robinhood reduces friction by giving users the chance to start investing without having to work through a broker. The companies that Donald Gayhardt oversees reduce friction by making it easier for users to get loans online.
That’s what convenience means when it comes to fintech services.
Recognize That Balancing Convenience and Security Is a Challenge
It’s worth noting that you are performing something of a balancing act when you offer this kind of convenience. Yes, eliminating steps from an existing process can make it easier for customers to take advantage of a given service. The problem is, in the financial services industry, some of those steps exist to protect consumers.
Fintech startups must walk a fine line between offering true convenience and protecting their customers. This is something to keep in mind throughout the development phase.
Again, following these tips does not ensure success. It may, however, substantially boost your odds of achieving success.