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July 10, 2024

How to Build a FinTech Startup: Tips From Industry Leaders

Yevhen Piotrovskyi
Yevhen Piotrovskyi
CTO and Founder

Building a FinTech company from scratch is a challenging venue — with many competitors and high customer expectations, 30% of entrepreneurs fail during the first two years. While it takes a lot of time and experience, at Yojji, we believe you can’t have too much information, so we’ve gathered the stories of the most successful FinTech founders with loads of experience. Keep reading to learn industry leaders’ tips and avoid similar mistakes when growing your startups.

The Rise of FinTech Startups

Over the past ten years, the FinTech sector has grown explosively, drastically altering the financial services market. This increase can be ascribed to several things, such as modifications in consumer behavior, governmental changes, and technological developments. The global FinTech market, estimated by Market Data Forecast to be worth $111.24 billion in 2019, is expected to rise at a compound annual growth rate (CAGR) of 22.17% to reach $325.31 billion by 2026.

This expansion has been largely fueled by technological innovation. Due to the widespread use of smartphones and internet connectivity, FinTech companies can now reach a wider audience and provide services previously unavailable to many. For instance, mobile banking apps, which offer convenience and real-time access to financial information, have completely changed how consumers handle their finances. Blockchain technology is another important invention that has enabled the development of cryptocurrencies and decentralized financial systems, which promises improved security and transparency.

Consumer behavior has also changed dramatically, with an increasing inclination toward digital and contactless purchases. Lockdowns and other social distancing tactics made physical banking and currency transactions less viable during the COVID-19 epidemic, which expedited this trend. According to a McKinsey & Company analysis, the pandemic significantly increased the usage of digital banking and payment systems, and many users said they would keep using these services after the pandemic.

FinTech companies have benefited from underserved markets, especially in developing nations without financial infrastructure. Millions of unbanked people have benefited from financial services offered by mobile payment systems like M-Pesa in Kenya, which has allowed them to engage in the formal economy. This has significantly influenced financial inclusion, enabling many people to escape poverty and promoting economic expansion.

Regulatory developments have significantly influenced the emergence of FinTech startups. Around the world, governments and regulatory agencies have put laws in place to encourage innovation because they see FinTech's potential to improve financial services. Regulatory sandboxes, for example, provide FinTech companies with a controlled environment to test their products while being overseen by regulators. This approach has been adopted in various countries, including the UK, Singapore, and Australia, providing a conducive environment for FinTech innovation.

The potential of the FinTech business is reflected in the spike in investment. Global FinTech funding hit $44 billion in 2020, up 14% from the year before, according to CB Insights. Because of this cash inflow, FinTech companies have grown quickly, added more products to their lineup, and penetrated new markets. Realizing the opportunity presented by FinTech startups, venture capital firms, private equity investors, and even traditional financial institutions are increasingly investing in them.

Read also: Seven Best Conferences for FinTech Industry in 2024

Profiles of 7 Successful FinTech Founders

In addition to informing you, Yojji also wants to inspire and motivate FinTech enthusiasts, so here are seven intriguing stories that will surely make you even more passionate about new beginnings.

Chris Larsen, Co-Founder of Ripple

Chris Larsen, Co-Founder of Ripple.jpg With the specific goal of developing a real-time payment protocol enabling safe, quick, and affordable international transactions, Chris Larsen co-founded Ripple in 2012. Despite having a background in business and having co-founded several FinTech startups, Larsen had to overcome considerable obstacles to be accepted by financial institutions and to stay under regulatory supervision. His tenacity and calculated strategy paid off, as Ripple became one of the top blockchain-based payment networks. To increase credibility and reach, Larsen highlights the significance of having a clear vision, remaining up to date on legislation, and developing strategic alliances.

Aditya Ghosh, Co-Founder of BankBazaar

Aditya Ghosh, Co-Founder of BankBazaar.jpg Aditya Ghosh co-founded BankBazaar in 2008 and has extensive experience in company management and strategy. His goal was to streamline the online application process for financial products. His initial days were difficult since he had to acquaint them with online financial services and foster their trust. With its easy-to-use interface and thorough product comparisons, BankBazaar has become India's premier online financial marketplace. According to Ghosh's essential advice, aspiring FinTech entrepreneurs should engage in customer education, establish trust through transparent and dependable service, and design a user-friendly platform.

Taavet Hinrikus, Co-Founder of Wise (formerly TransferWise)

Taavet Hinrikus, Co-Founder of Wise (formerly TransferWise).jpg Tech specialist and Skype's first employee Taavet Hinrikus, co-founded Wise in 2011 to provide an affordable, transparent way to send money internationally. At first, Wise found it difficult to win over customers and compete with traditional banks, but Hinrikus' emphasis on much lower fees and open pricing helped the business take off. Wise is a significant player in the market for international money transfers today. Hinrikus emphasizes the value of openness, economy, and ongoing client feedback utilization to enhance the service.

Renaud Laplanche, Founder of LendingClub

Renaud Laplanche, Founder of LendingClub.jpg LendingClub was created in 2007 by Renaud Laplanche, a serial entrepreneur with experience in law and business. His objective was to use peer-to-peer lending to transform the current lending system completely. LendingClub became a leader in alternative lending thanks to Laplanche's dedication to developing a more open and transparent lending platform despite legislative obstacles and mistrust from traditional lenders. His recommendations center on finding ways to upend established markets, ensuring you comply with the law, and focusing on the customer.

Anne Boden, Founder of Starling Bank

Anne Boden, Founder of Starling Bank.jpg In 2014, Anne Boden, who had more than thirty years of banking and technology experience, established Starling Bank. She aimed to establish a digitally-first bank that provides an exceptional banking experience. Boden has to overcome obstacles to compete with well-established institutions and secure finance. However, her dedication to using technology to deliver cutting-edge services and top-notch customer support contributed to Starling Bank's rise to prominence as a major challenger bank in the UK. Boden counsels FinTech entrepreneurs to emphasize customer service, use technology for innovation, and persevere in adversity.

Jack Dorsey, Co-Founder of Square

Jack Dorsey, Co-Founder of Square.jpg Square was co-founded in 2009 by Jack Dorsey, the man behind Twitter, to give small companies a simple way to take credit card payments. Square is a significant FinTech business offering payment and financial services despite difficulties acquiring merchant adoption and regulatory obstacles. This is due to its straightforward, reasonably priced, and easy-to-use solution. Some of Dorsey's most important discoveries are developing scalable solutions that can expand with users, providing inexpensive options to draw in small enterprises, and developing user-friendly solutions that address actual problems.

Patrick Collison, Co-Founder of Stripe

Patrick Collison, Co-Founder of Stripe.jpg Patrick Collison, who has experience in both computer science and entrepreneurship, co-founded Stripe in 2010 to make online payments easier for developers. At first, Stripe had trouble winning over engineers and companies in a cutthroat industry. Stripe has grown to be one of the world's most well-known payment processing businesses by offering a feature-rich, developer-friendly platform. Collison advises concentrating on meeting the needs of developers, constantly inventing and adding features that satisfy customer demands, and establishing confidence via dependable and secure services.

Practical Tips for Aspiring FinTech Entrepreneurs

Although breaking into the FinTech sector can be difficult, aspirant FinTech businesses can succeed in this cutthroat market by taking the appropriate strategy. Here are five useful pointers to get you going:

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1. Establish a clear mission and vision first. A well-defined goal and mission are essential when launching a financial business. Clearly state the issue you want to tackle and explain how your solution will be unique in the marketplace. A clear mission statement will direct your choices and keep your attention on your objectives. For instance, Taavet Hinrikus and Kristo Käärmann's success was primarily attributed to the low-cost, transparent international money transfers they offered when they created Wise (previously TransferWise).

2. Recognize the environment of regulations Managing the regulatory environment is one of the main FinTech issues. Keep up with pertinent rules and make sure your company abides by them. Early interaction with regulators and legal counsel can help avoid expensive legal problems. Chris Larsen from Ripple emphasizes the significance of being aware of regulations and proactively interacting with them.

3. Concentrate on forming a robust team Your most valuable resource is your team. Put together a team with technology, finance, marketing, and compliance expertise. An effective team can overcome obstacles, promote innovation, and guarantee operational excellence. A large part of Anne Boden's success at Starling Bank may be attributed to the diverse and brilliant team she assembled around her.

4. Use Technology to Spark Original Thought Technology is at the heart of FinTech by nature. Invest in state-of-the-art technology to create creative solutions that satisfy your clients' changing needs. It's critical to keep up with technological advances involving mobile, blockchain, or AI. Stripe's Patrick Collison created a developer-friendly framework that streamlines online payments by utilizing cutting-edge technologies.

5. Give the user experience priority Your FinTech solution can stand out if the user experience is smooth and simple. Perform in-depth user research and keep improving your product in response to feedback. According to data, 80% of consumers are willing to spend extra for a better user experience. Taavet Hinrikus of Wise emphasizes the significance of user-centric design in developing products that offer an exceptional user experience and effectively address real-world issues.

Conclusion

A novel piece of advice for prospective FinTech business owners is to begin with a narrowly defined niche. Rather than attempting to address every financial issue at once, pinpoint a particular issue or underrepresented market area and excel at filling it. For instance, Taavet Hinrikus and Kristo Käärmann of Wise (previously TransferWise) were able to polish their solution and establish a solid name in that field since they solely concentrated on offering affordable, transparent international money transfers.

Gaining expertise in a particular field can help you develop a devoted following, establish credibility, and lay a solid platform for future growth. This targeted strategy allows you to allocate resources more wisely, understand customers better, and differentiate yourself in a crowded market.

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Ildar Kulmuhametov
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