05 October 2022

The Challenges FinTech Startups Face

Written By Hassan Iftikhar - Social Media Marketing Manager at digitify

The Challenges FinTech Startups Face

The world of tech is evolving; it’s experiencing a metamorphosis at an exceedingly fast pace. Businesses, small and medium enterprises (SMEs) and start-ups have all embraced change and are evolving accordingly. Technology has helped galvanize many areas of business and has opened a new realm of possibilities as FinTech-related businesses have grown substantially.

Online cashless payments and banking have gained great prominence in the recent past and with an array of options for us to choose from, banks and businesses are shifting to newer payment solutions that exclude tangible money altogether. A litany of new businesses are focusing on FinTech solutions as their core business offerings as savvy millennials and the younger generation now go for convenience and ease. Mobile banking apps once considered a rare perk are now ubiquitous and are used by all which has forced the dynamics of the market to change. Moreover, the once brick and mortar institutions, from banking to retail are now witnessing a change and have become more tech-centric, which is a major part of their business proposition.

More and more start-ups are focusing on FinTech-related offerings i.e., mobile wallets, digital payments, online payment solutions for e-commerce businesses, financial data platforms for investment professionals, and a whole lot more. This is just the tip of the iceberg when it comes to ideas and what new start-ups are coming up with. Even though the FinTech market is ripe to enter, it comes with a multitude of challenges and caveats. People may have good to great ideas, but a lot do not have the expertise needed to make a foray and subsequently a strong foothold in the industry.

An idea alone isn’t enough to not only be successful but for longevity in the industry because there are myriad barriers to entry. The regulatory part of setting up a FinTech based start-up dealing with i.e., mobile payments or a mobile wallet has countless regulatory procedures to go through. Start-ups need guidance with regards to the regulatory landscape, which can be a minefield, in terms of the licensing they need, the banks they need to work with and the official regulatory bodies they need to work with such as FCA in the UK. For example, an IPA (in principle approval) is given by a State Bank to a mobile wallet/banking application developer, to be able to start its operations along with a plethora of other steps and procedures.

A great idea is key to the success of a start-up but with fierce competition, daily tech innovations, and a great number of competitors vying for success, just an “idea” will not suffice. There must be superior backend technology that enables the business to stand apart. From the technology stack used, to the look of the App that is easy to use, and its functionality; everything matters. Companies like digitify help visualise such ideas from the inception stage to designing, developing, and ultimately deploying the digital products. 

These aren’t the only challenges a FinTech start-up faces. It is imperative to understand what the customer requirements are, what they want, and how will your product/app provide something unique and different. One should define their USP, (unique selling proposition) whether it’s a resplendent user interface, UI/UX, superior technology, and more. All these questions are provided by companies like digitify which provide end-to-end services under one roof. digitify helped YAP, the first independent digital banking platform in the UAE, to not only create its banking platform from scratch but also aided in creating concepts for the design which was an amalgamation of functionality and visually funky designs to appeal to the target audience and the youth. 

The next challenge is the development of a digital product/service as it is essential who you choose to partner with. The pertinent questions to ask here are; who can you work with, will you go for in-house development or look for an external partner? These are questions that determine the viability and future success of any start-up or tech business venture. For start-ups and small and medium enterprises, the prudent choice is to have one dedicated partner organisation that handles all the work, a consolidation of supplier/partner. Opting for a single partner comes with its own set of questions and concerns. Trust is a major concern since many businesses are circumspect in getting their coding done because when outsourced, the given IT companies will write the code and keep it, creating problems and snags for the nascent companies. It is vital to partner with organisations that not only help create the code but officially hand it over to the customer, look after it and provide ongoing technical maintenance. digitify in question does this for its customers.

The next impediment that a FinTech start-up can face is when a digital product/App is designed and developed, how will it be deployed? Will it be put on private cloud, which requires a hefty sum of money? Will it be deployed through public cloud? These are apt questions that need to be contemplated because what should be done is to work with a competent tech partner that provides DevOps facilities because this helps accelerate your application’s deployment and delivery processes. It is vital to ensure the infrastructure is scalable vertically and horizontally. digitify worked with Xplora to redesign its infrastructure to make it scalable in cases like on Christmas day in the UK, when the smartwatches were given as gifts by parents to their children, on Christmas morning, the bulk of the audience used it concurrently, digitify made the infrastructure scalable to ensure no technical glitches were observed. 

Cyber security is key for FinTech start-ups because they face risks from hackers and threats that can significantly impede the operations of their businesses. It is essential to ideally work with the same partner company that designed, developed, and deployed your company’s product. A FinTech start-up needs to focus on the prevention, detection, and response of cybersecurity threats, to conduct expert security assessment, monitoring, and provide advisory services. digitify provides all this along with a 24/7 SOC (Security Operations Centre) that monitors the client’s digital applications. 

Lastly, one essential step all start-ups in the realm of FinTech must take is to have the right partner network. For a start-up providing payment solutions, it is imperative to work with the ecosystem of FinTech partners; such as challenger banks and online banking service providers to deliver these services by integrating the applications into the ecosystem of partners, including payment gateways, processor integration, mobile payments, bank integration, payment schemes and more.

To overcome such hurdles, companies like digitify make the process easy as it bodes well for any start-up to opt for an organisation that provides end-to-end services, all under one roof to avoid the hassle of choosing a company that designs the app, another that develops it, and another that helps roll it out, tests it, expedites it launch and provides services well after that as well.

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