From Idea to Launch, Know How to Start a FinTech Company

We have reached a point where people must use their laptops and smartphones to go through their daily routines. Its usage extends to payments and banking being done digitally through apps. It allows people to manage their personal finances, trade cryptocurrencies, and even invest in international businesses through the convenience of an app. If you want to know how to start a FinTech company, then it is first important for you to set the base and then find the right tech partner.

In recent years, especially after the pandemic, the attention has shifted to digital payments even more. The global FinTech market size hit over $294 billion in 2023. It is growing at a CAGR of 16.5% from 2024-2032 and is predicted to reach over $1152 billion by 2032.

The adoption rate of FinTech apps is so rapid that the number of FinTech startups in the U.S. has doubled in the last five years. In 2024, the global FinTech user base, especially in digital payments is forecasted to exceed 3.5 billion.

If these numbers impress you, let us discuss how you can complete your FinTech startup business plan.

Startups revolutionizing the FinTech sector

Let us take a look at some companies in the industry that are doing well in their niche.

Stripe

Stripe’s recent tender offer, resulting in a substantial $694.2 million raise, underscores its robust financial health and investor confidence.

The app offers a suite of payment APIs that enable businesses to accept and manage online transactions. Stripe’s innovative technology supports various payment methods, including credit cards, debit cards, and cryptocurrencies, making it a preferred choice for startups and large enterprises alike.

Mint

Mint raised a total of $78.4 million across 8 funding rounds, with the largest single round amounting to $24 million.

The app aggregates all of a user’s financial accounts into one platform, providing a comprehensive overview of their financial health. Mint offers features like budgeting tools, expense tracking, and financial goal setting, empowering users to make informed financial decisions.

Robinhood

In February 2024, Robinhood exhibited strong growth across various key metrics. The platform’s user base expanded to 23.6 million funded customers, indicating continued popularity and trust among investors. Assets Under Custody (AUC) surged to $118.7 billion, marking a substantial 16% increase from January 2024, reflecting increased investor holdings and confidence.

The app democratizes stock trading by offering commission-free trades, attracting a large base of retail investors. Robinhood’s platform includes features for trading stocks, ETFs, options, and cryptocurrencies, making it accessible to a broad audience.

Coinbase

Following the explosion in crypto-trading, Coinbase reported quarterly profits exceeding $1 billion.

The app provides a secure platform for buying, selling, and storing cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Coinbase’s intuitive interface and strong security measures have made it one of the most trusted names in the crypto space.

Revolut

Revolut anticipates achieving $2 billion in revenue and a double-digit net profit margin by the end of 2023. It offers a range of banking services, including international money transfers, currency exchange, and cryptocurrency trading, all accessible through a mobile app.

Now that we have seen the major FinTech startups that are reaching great heights with their success stories, let’s look into the steps needed to create a FinTech startup.

How to start a FinTech Company?

While building a FinTech startup, it is crucial to consider the necessity of making your FinTech business financially resilient. This helps to combat the rising complexities of financial regulations and systems. Now let us dive into the steps you must follow to build a financial technology startup.

Know the regulations

Banking and FinTech are highly regulated sectors. Therefore, you must be familiar with every aspect of this extremely complicated industry, including the governing bodies, legislation, restrictions, and criteria.

The General Data Protection Regulation (GDPR) covers all companies that interact with client data. For businesses in the finance sector, this policy is just the beginning. Anti-money laundering (AML) guidelines, Know Your Customer (KYC) compliance standards, and adherence to the PCI DSS are typical fintech regulations in the US. Additionally, you might have to use conventional authentication methods like digital certificates.

Remember, wherever there is money, there are laws and regulations. Make sure your proposal complies with existing laws before starting any work to guarantee that your customers’ money is secure in your system and that their identities are reliably secured. To keep compliance issues under control, prepare to put regular legal auditing practices into place.

Choose your niche carefully

The need for all types of FinTech software is currently steadily increasing. However, digital payments, personal finance management, and alternative financing are the fastest-growing market categories. The use of investing solutions has also increased dramatically.

Here are a few of the several FinTech subdomains to take into account:

• Investment management
• Personal financial management
• Global money transfers
• Loans and advances
• Bitcoin and blockchain-based technologies
• Crowdfunding

Your product can target a particular audience, such as a nation or demography, depending on your subdomain. It’s preferable to start your firm locally and then grow internationally.

Establish a competitive advantage

Once you’ve decided on a niche, research your competitors. A thorough knowledge of the market and your competitors can assist you in identifying a distinctive quality or competitive advantage that will set your product apart from similar products already on the market.

It could be a brand-new product that targets a narrow market (such as financial services for the unbanked), or it could just be an upgrade to an already excellent service (e.g., fast and simple mobile banking).

The business potential in FinTech is quite broad at first appearance. However, well-known companies like Microsoft and a number of extraordinarily lucrative businesses (like Stripe and Coinbase) dominate the market. In any case, you should stake your idea on flawless execution if you want to succeed in the FinTech sector.

Build your team with the right people

One of the many requirements for a successful company is having the right individuals on your team. However, it could be difficult to draw in developers and expand your team locally, particularly if your area has a small talent pool.

To develop a usable solution in a constrained time frame, your team needs to be knowledgeable in both technology and finance. Consider outsourcing your development tasks to a reputable software development firm like Appinventiv. Your partner development company must have a proven track record of creating effective startup solutions.

By doing this, you’ll be able to make significant financial savings and redirect your managerial attention to marketing and product development.

Prioritize data security

Verify the security of your business along with the encryption and cloud storage of all important data. As a FinTech startup, this should be your most urgent requirement. FinTech security problems could cause the disclosure of sensitive information that one could exploit for theft or fraud.

Run thorough tests to inspect any vulnerabilities to assure your company’s top-notch FinTech cyber security. Apply transport layer security (TLS) to all network connections, stop unauthorized API connections, and use an HTTPS SSL certificate to secure your clients’ information.

You could also use a cloud platform like AWS. It offers a strong defense against DDoS assaults and backs up the data to go back online in case of any network outages. You must also put in place multi-step authentication on the client’s end and have users use strong, frequently-changing passwords.

Obtain funds

If your personal resources are limited (which they typically are), you must first secure external investment before launching a financial firm. Your FinTech startup funding can come from close friends, family, or seed investors. In order to get the funding, you need to move to the MVP stage, where you’ll be presenting your firm to more experienced investors for future development and expansion.

[Bonus Read: How to get investors for your mobile app startups?]

Set your MVP’s scope

The shortest possible time between creating the first line of code and onboarding your first users should be your top priority as a startup entrepreneur. In order to do that, you must carefully define the scope of your MVP (Minimum Viable Product), which should be minimal yet provide users with enough features and capabilities to acquire a feel for your business.

Quickly reaching the MVP stage allows you to cut costs, reduce time to market, and start testing and responding to user feedback much earlier, all of which naturally improve your chances of long-term success.

Product launch and improvements

After you have gotten your MVP approved, the next step is to release your product in the market.

You will face fierce competition as a new FinTech company but do not get intimidated. Keep concentrating on improving your product for a better user experience and stronger cybersecurity.

Even if customers think your product is excellent, you should constantly test new concepts to improve it.

Major technologies required for building a FinTech startup

To start a FinTech company, you should be updated about the newest technology trends that you can incorporate into your business. The better the technology is, the better you will be able to deliver to your customers. Here is a list of the basic but essential technologies you will need to get started with your FinTech business.

Artificial intelligence

AI recognizes and analyzes real-time data, which then recommends the best course of action. Because of this reason, AI has several applications in resolving financial issues. For instance, it can be used to identify fraudulent activity in digital banking, insurance, etc.

Blockchain

Blockchain technology will help you build a reliable and transparent FinTech product. It produces a time-stamped series of uneditable data that you cannot delete. Plus, it saves in a decentralized manner.

Cybersecurity

Cybersecurity is a primary concern for every FinTech company. Before starting a FinTech startup, you must be cautious about how you will handle and store sensitive customer data.

To reduce security lapses and data theft, your team should use various security measures.

Microservices

An application can be organized as a collection of connected services using microservices. It creates a distributed system with decentralized data management. You can quickly incorporate any new solution into your infrastructure.

Cloud Computing

Cloud computing provides FinTech startups with scalable and cost-effective infrastructure for storing, processing, and analyzing large volumes of financial data. Cloud-based solutions offer flexibility, reliability, and accessibility, allowing startups to focus on innovation without the burden of managing complex IT infrastructures. Additionally, cloud computing ensures data security and compliance with regulatory requirements.

Big Data Analytics

Big data analytics enables FinTech startups to analyze large volumes of financial data to derive insights, trends, and patterns. By leveraging advanced analytics tools and techniques, startups can make data-driven decisions, improve risk management, and enhance customer experiences through personalized services and recommendations. Big data analytics also helps startups identify market trends and opportunities for innovation.

Mobile Technologies

Mobile technologies are integral to FinTech, providing a platform for developing user-friendly mobile banking applications and digital wallets. With the widespread adoption of smartphones, mobile apps offer customers accessibility, convenience, and on-the-go banking services. FinTech startups leverage mobile technologies to enhance customer engagement, streamline transactions, and deliver personalized experiences tailored to individual preferences.

RegTech (Regulatory Technology)

RegTech solutions help FinTech startups comply with complex regulatory requirements and reporting obligations. By automating compliance processes, monitoring regulatory changes, and ensuring adherence to legal frameworks, RegTech solutions reduce regulatory risks and operational costs. FinTech startups leverage RegTech tools to navigate regulatory challenges, maintain compliance, and build trust with regulators and customers alike.

APIs (Application Programming Interfaces)

APIs are essential for enabling seamless integration with third-party services and platforms, allowing FinTech startups to leverage existing infrastructures and functionalities. By utilizing APIs, startups can access financial data, payment gateways, and other services, accelerating the development process and enhancing the scalability and modularity of their applications.

{Also read:23 Top Fintech Trends to Look out for in 2024}

Two Primary Approaches to Building Your FinTech Offering

Let’s explore two prominent ways to build your FinTech offering, enabling businesses to innovate, grow, and effectively serve their customers.

Collaborating with a BaaS Provider

One approach to building your fintech offering is to partner with a Banking-as-a-Service (BaaS) provider. BaaS providers offer a suite of banking services and APIs that enable you to integrate banking functionality directly into your FinTech applications.

This approach allows you to leverage the provider’s infrastructure, regulatory compliance, and banking licenses, significantly reducing the time and cost required to develop your own banking capabilities. Partnering with a BaaS provider can accelerate your product development and help you quickly bring innovative financial services to market.

Forming a Direct Partnership with a Bank

Another approach is to establish a direct partnership with a bank. You can access their established financial infrastructure, regulatory expertise, and customer base by collaborating with a traditional bank. This partnership can give your fintech company the credibility and trust that comes from associating with a well-known financial institution.

Additionally, banks can offer valuable insights into compliance and risk management, ensuring that your fintech offerings meet regulatory standards. A direct partnership with a bank can enhance your ability to provide your customers comprehensive and secure financial services.

Addressing Challenges: Mitigating Risks in the FinTech Industry

Starting a fintech company presents several prominent challenges. Let’s delve into these obstacles and explore effective solutions for a successful launch.

Challenge: Regulatory Compliance

Already outlined above, navigating the complex and evolving regulatory landscape poses a significant challenge for FinTech startups. Ensuring compliance with stringent financial regulations requires in-depth knowledge and expertise.

Solution:

FinTech startups should engage legal experts specializing in financial regulations to address regulatory compliance challenges. These professionals can guide navigating regulatory frameworks, ensuring adherence to compliance requirements from the outset, and staying updated on regulatory changes. By partnering with legal experts, startups can mitigate compliance risks and build a solid foundation for their operations.

Challenge: Cybersecurity 

Protecting sensitive financial data from cyber threats is paramount for FinTech startups. As per the report of Forbes, in 2023, there were 2,365 cyberattacks, impacting 343,338,964 victims. This marked a 72% increase in data breaches compared to previous years. With cyber-attacks becoming increasingly frequent and sophisticated, robust cybersecurity measures are essential to safeguarding customer information and maintaining trust.

Solution: 

FinTech startups should implement robust security measures to mitigate cybersecurity risks, including encryption, multi-factor authentication, and regular security audits. By investing in cybersecurity technologies and protocols, startups can strengthen their defense against cyber threats and protect the integrity and confidentiality of customer data.

Challenge: Customer Trust and Adoption

Gaining customers’ trust and driving adoption in a crowded market can be challenging for FinTech startups. Building credibility and confidence among potential users is essential for achieving sustainable growth and success in the long term.

Solution: 

FinTech startups should prioritize transparency, data security, and seamless user experiences to build trust and foster adoption. By providing clear and transparent information about their products and services, addressing customer concerns promptly, and delivering intuitive and user-friendly interfaces, startups can enhance customer trust and encourage adoption of their solutions.

Challenge: Funding and Capital Constraints

Securing adequate funding to fuel growth and innovation is a common challenge for FinTech startups. Limited access to capital can hinder startups’ ability to develop and scale their products, making it challenging to compete effectively in the market.

Solution: 

FinTech startups should explore various funding options, including venture capital, angel investors, and government grants to address funding and capital constraints. By presenting a compelling business case, demonstrating market potential through a strong MVP, and showcasing the scalability of their solutions, startups can attract investment and secure the resources needed to accelerate growth and innovation.

Challenge: Technological Complexity

Developing and integrating complex financial technologies requires specialized expertise and resources. Overcoming technological challenges and staying abreast of the latest advancements in the field is essential for driving innovation and maintaining competitiveness.

Solution: 

FinTech startups should hire a skilled development team with expertise in software development, data analytics, and emerging technologies to tackle technological complexity. By assembling a talented and multidisciplinary team, startups can leverage diverse skill sets and perspectives to develop innovative solutions and stay ahead of the curve in a rapidly evolving technological landscape.

Challenge: Market Competition

Competing with established players and emerging startups in FinTech poses a significant challenge for newcomers. Standing out in a crowded market and gaining market share requires differentiation, innovation, and strategic positioning.

Solution: 

To address market competition, FinTech startups should focus on differentiation and innovation. By identifying unique value propositions, targeting underserved market segments, and delivering innovative solutions that address specific customer needs, startups can carve out their niche in the market and differentiate themselves from competitors.

Challenge: Scaling Operations

Scaling operations to meet growing demand while maintaining quality and efficiency is critical for long-term success. Managing growth effectively and ensuring scalability across all aspects of the business is essential for sustaining momentum and achieving sustainable development.

Solution: Invest in Scalable Infrastructure

FinTech startups should invest in scalable infrastructure to address scalability challenges, automate processes where possible, and prioritize agility and flexibility in their business operations. By adopting scalable technologies, streamlining processes, and fostering a culture of innovation and continuous improvement, startups can position themselves for long-term success and growth in the competitive FinTech landscape.

How can Appinventiv help you build your own FinTech startup?

Still, wondering how to start a FinTech company? Looking for a finance software development company to execute your FinTech startup ideas?

Appinventiv, a leading force in FinTech app development, is poised to revolutionize the financial services sector. With our innovative custom services and disruptive mindset, we empower FinTech startups to redefine industry standards and drive unprecedented success in the realm of finance.

We are an AI app development company operating with a collaborative ethos, specializing in crafting cutting-edge FinTech applications that redefine user experiences and deliver tangible business outcomes. 

Our comprehensive suite of FinTech app development services covers every stage of the development lifecycle, from conceptualization to ongoing maintenance. We kickstart the process by conducting in-depth consultations to grasp our client’s unique needs and objectives, laying the groundwork for comprehensive concept ideation.

Utilizing a strategic UI/UX design approach, we ensure that every interaction with the app is intuitive, engaging, and aligned with the brand’s identity. Our seasoned experts excel in both frontend and backend development, leveraging the latest technologies to build robust, scalable, and secure solutions tailored precisely to our clients’ specifications.

Appinventiv has worked with multiple FinTech clients in the last decade, helping them achieve significant results. For instance, our team assisted Mudra in developing their AI-powered fintech app. We crafted a minimalist UI/UX design with bold colors, modern typography, and interactive illustrations to enhance user experience. We implemented a closed system chatbot, overcoming engineering challenges to ensure secure data processing and dynamic interactions. 

Six months of our efforts led to development of an app that was launched in 12+ countries globally.

FAQs

Q. How are banks using FinTech?

A. Banks are leveraging FinTech to enhance customer access to cash and credit and improve user experiences. By integrating digital technologies such as chatbots, smartphone apps, and machine learning algorithms, banks offer seamless, immediate access to funds and services.

AI-powered virtual assistants and chatbots provide text- and voice-enabled platforms for various banking functions, offering quick and comprehensive responses to customer inquiries. Additionally, smartphone apps developed by banks use these technologies to facilitate everyday banking activities, provide personalized financial advice, detect fraud, and predict customer needs, significantly enhancing operational efficiency and customer satisfaction.

Q. Will FinTech startups substitute or replace banks?

A. FinTech startups offer significant advantages over traditional financial institutions, including greater innovation and more rapid, cost-effective services. These capabilities have allowed FinTech to disrupt the financial services sector by introducing new efficiencies and customer-centric solutions.

However, it is unlikely that FinTech startups will completely replace banks. One major reason is the high level of trust and loyalty that customers have developed with banks over many years, which is a significant advantage that FinTech startups cannot easily replicate. Furthermore, traditional banks benefit from established compliance systems and regulatory relationships, providing a level of security and reliability that FinTechs often lack.

In essence, the future of financial services is likely to be defined by the synergy between traditional banking institutions and FinTech companies, facilitated by strategic partnerships and technological advancements.

Q. How to start a FinTech company?

A. If you are planning to build a fintech company, below are the key steps that you need to consider for getting started –

• Know the regulations
• Choose your niche carefully
• Establish a competitive advantage
• Build your team with the right people
• Prioritize data security
• Obtain funds
• Set your MVP’s scope
• Product launch and improvements

Q. How much does it cost to start a FinTech company?

A. Starting a FinTech company can range widely in cost. Developing a Fintech app might cost between $30,000 to $250,000, covering initial development, design, and testing. Additional costs include regulatory compliance, infrastructure setup, team salaries, and ongoing operational expenses. Scaling up to a fully-fledged company with advanced features and regulatory requirements can escalate costs into the millions, depending on the scale and ambition of the venture.

Q. What key regulatory considerations should entrepreneurs factor in when starting a FinTech startup?

A. When starting a FinTech startup, entrepreneurs should consider key regulatory factors such as compliance with financial regulations, obtaining necessary licenses and permits, and adhering to data protection and privacy laws. Understanding and navigating the regulatory landscape is crucial for ensuring legal compliance and building trust with customers and investors.

Q. How can leveraging emerging technologies enhance the competitive advantage of a new FinTech startup in the market?

A. Leveraging emerging technologies such as blockchain, artificial intelligence, and big data analytics can enhance the competitive advantage of a new FinTech startup by enabling innovative solutions, improving operational efficiency, and delivering personalized customer experiences. By staying at the forefront of technological advancements, startups can differentiate themselves in the market and capitalize on new opportunities for growth and success.

THE AUTHOR

Sudeep Srivastava

Co-Founder and Director