Fintech, or Financial Technology, is essentially just a broad term that is used to describe the wider world of new tech in the financial service industry, aiming to improve and sometimes even automate financial process.
Fintech could be referring to software, algorithms or applications for your desktop computer or your mobile or smartphone. In some cases, it includes hardware, too—like internet-connected piggy banks.
Fintech companies have enabled you to do such things as deposit checks, move money between accounts, pay your bills or take out loans on sites such as Dime Alley, all through the use of technology. More recently, crypto trading and exchanges have also been made possible as a result of Fintech industry advancements.
FinTech Facts: What is FinTech?
- At the end of 2021, there were 10,755 fintech startups in the Americans, making it the region with the most fintech startups globally.
- The revenue of Fintech companies is expected to grow at an average rate of nearly 12 percent in the next few years and reach a value of $200 billion by 2024.
- Fintech is a fast-growing industry: in 2021, global investments in the sector were more than 23 times higher than in 2010.
How Does FinTech Work?
Fintech provides both individuals and companies with access to traditional financial services in innovative ways that previously weren’t available. Where many financial services were only available face-to-face or via a traditional bank, the evolving fintech industry enables customers to access such services online.
For instance, many conventional banks’ mobile apps now offer customers on-the-go access to bank services, including the ability to view your balance, transfer funds or deposit a check.
Additionally, fintech’s offer the opportunity to take out short-term, personal loans such as payday loans in a completely online process. Dime Alley’s loans process is all done through an online application which can be completed on a mobile or desktop and takes just 5 minutes to complete.
Fintech also automates many services businesses use, such as loan underwriting and real estate appraisals. Artificial intelligence (AI) combined with large amounts of consumer data helps fintech businesses understand their customers and powers their marketing campaigns, product development and underwriting.
How To Start a FinTech Business
Firstly, identify a niche or a gap in the market.
In order to start a fintech company, you must be clear of your target market and the problem you are looking to address. Very often, the best startup ideas come from identifying real-life problem that you may have encountered and trying to find a solution to them.
Your product should also cater to a specific audience, e.g., a country, a state, a city or a particular demographic. It is always better to launch your business locally first and expand to the global market later.
Secondly, get to know the regulations.
The banking and finance industries are highly regulated — and for obvious reasons. The regulations are why financial service industries can be tough to break into.
Several laws have been put in place to ensure that these sectors are protected from frauds, such as predatory lending in the lending industry, and can immensely vary depending on the country, state or region you want to operate in.
You need to ensure you know what the regulations will be and understand how they might affect the operations of your business.
Thirdly, understand your market and competitors.
Now that you have identified your niche and the location, you need to study the competition. You are entering into a market with existing solutions, and therefore your product should be unique and address a specific gap in that subdomain.
For example, the financial service is a broad niche market, but can you identify a certain gap in it. You may think of the underbanked category and provide a solution for them.
Alternatively, you may decide that your business isn’t there to introduce something new but to improve the quality of what is already there. Regardless, you should still be aware of what sets your business apart from others.
Lastly, look into funding your fintech business.
Starting a fintech company can be an expensive thing to do. Making and launching a good product or service requires a good team, marketing and time, which isn’t cheap.
Getting an investor on board is one way that you can ensure not to compromise on the quality of your product and provide you with the funds to hire the best people or help you bring your idea to the market.
Alternatively, a business loan or other type of short-term loan could be a good way for you to get the funding to get your business up and running.