Fintech is on the rise, and it’s disrupting the financial services sector like never before, but getting it right is far from straightforward.
In the world of finance, fintech is the upstart coming to challenge the established order. A new wave of apps are flooding the market that make it easier for people to manage their finances, get services and play the stock market. But for every raging success, there’s a silent flop. Here are ten tips to give you the best chance of success.
1. Keep it simple
The power of fintech is its ability to take complex things and make them simple from the user’s perspective – whether it’s financial management, transferring payments or trading stocks. Each of these will be handling large amounts of information, but they need to present it in a way which is simple for the user to understand and use. If it isn’t, there are plenty of other similar products they can choose instead. A great example of this is Robinhood, an app which lets you trade stocks without the usual fees. It keeps things simple. There are none of the more advanced options on other trading apps – you simply buy and sell stocks or put stop options to limit order. It’s perfect for beginners.
2. Need to know basis
The financial world is notorious for its use of spreadsheets. Spreadsheets full of reams and reams of information most of which you don’t really need. The best apps are those which manage to filter information onto a user’s dashboard, avoiding the curse of information overload. Rather than wade through excess data, you need simple, basic information and the ability to take quick action if you need to. For those who need to delve deeper into the detail there can be sub-level options, but at the top level, users will reward brevity.
3. Embrace AI
Artificial Intelligence is coming and, while its full potential may lie further down the road, it is already proving itself enormously effective. Take the example of X.ai a virtual assistant which runs on the power of artificial intelligence to respond to emails, schedule meetings and handle basic tasks. People who send you emails receive a reply from Amy or Andrew. They can understand basic English and commands to communicate with contacts in a natural and human manner. This is what artificial intelligence can do. It can automate many of the basic processes and take many of the routine and mundane decisions out of the hands of users.
4. Keep margins low and volumes high
Venture capital loves an expanding user base, and it is this which is likely to attract investment. While conventional companies might try to maximize the profit on each sale, successful fintech innovation relies on low profit margins and high sales volume. By keeping operating costs low, it becomes relatively easy to cover expenditures while simultaneously driving revenue.
5. Follow the rules
Remember the story of Icarus – the man who flew too close to the sun? In the fintech world, this applies to companies which try to grow too quickly and forget the basics. Security is paramount. The more we embrace digital, the more our content is exposed online. Regulators around the world are also updating and tightening their rules. The arrival of new legislation such as Europe’s General Data Protection Regulation and several similar laws around the world places additional scrutiny on the way businesses handle their data, but more than that they also include higher fines. This means that keeping data safe is more difficult, obeying the rules is more complicated and the consequences, if you get it wrong, could be catastrophic. So, while it’s tempting to cut corners it could be the death of your company.
6. Focus, focus, focus
If you try to be all things to all people, you’ll be nothing to anyone. There have been several start-ups which try to encompass the power of several great businesses under one umbrella. Unfortunately, they end up going nowhere. For example, imagine a new app which promises to combine the benefits of social media, Uber and eBay into one app. It sounds great, but each of those functions has someone else doing something much better than they do. eBay has been so successful, for example, because it is the best at what it does. Likewise, a new app called Enforcd is earning rave reviews because it understands one basic problem facing its user base – evolving financial regulation. By providing a global financial regulatory database it helps corporations understand their obligations, learn from the mistakes of others and improve their own compliance.
7. Understand the APIs
Application Programming Interfaces do much of the hard work – so much so that they are worth an enormous amount themselves. Braintree, for example, which manages payments was recently acquired by Paypal for $800million. Great connections with APIs can help you provide a service which is faster, better and simpler than your competition, and in the dog eat dog world of fintech that could be the edge you need.
8. Don’t do it alone
There is a temptation to view fintech as rising up against the established financial ecosystem. However, the most successful will be those which understand what’s already there and works with it. The rise of blockchain, for example, was seen as an opposing force to the financial establishment, but many existing financial institutions are now finding ways to use it to their own advantage. One of the best at this has been Ripple, which works with banks rather than against them by enabling faster and cheaper transactions. It has partnered with several institutions including American Express to improve international payments. It works for everyone – the plucky fintech pioneer, the established bank, and the end user.
9. Understand the ecosystem
Most fintech products will have to integrate with other platforms, so it’s vital that they can manage this seamlessly. This is particularly important with the arrival of Open Banking which requires banks to share their information with other approved companies – if their customers ask them to. Several companies have produced open banking apps which help customers manage all their financial information from different financial partners. For that, the app needs to be able to integrate with different operating systems to deliver the data to the user.
10. Automate everything
Great apps will automate 99% of all the processes and decisions. For example, Acorns automatically invests all your spare change into an investment portfolio. So, if you make a purchase of £5.50, it withdraws 50p from your account and invests it. It does this every time you make a purchase so the money builds up quickly. It’s quick, easy and means you end up saving money without even thinking about it.
These, then, are some golden rules to follow. Fintech is full of opportunity, but for all those hundreds of start-ups setting sail, most will flounder on the seas. There is no sure-fire way to ensure you are one of the ones that succeeds, but these rules give you the best chance possible.
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Market Research Team, RapidValue