FinTech is one of the most trending businesses in today’s time. You will surely find a FinTech app that enables you to open an account or take a loan. These businesses are revolutionising our way of dealing with finances.
Despite significant growth, many FinTech startups are having trouble making an impact because of the high risks in this area. Like any other startup, FinTech companies face challenges such as limited funding, rising competition, shifting consumer habits, and more. Additionally, FinTech startups deal with extra issues related to regulations.
So as you have seen earlier that starting a FinTech startup is not an easy task. However, you can start your FinTech startup by keeping a few things in mind. In this blog, we will show you the top 8 mistakes that FinTech startups so that you do not repeat the same.
Top reasons why a FinTech startup fails?
It is no doubt that Fintech startups are the reason that we are moving towards digitizing our payments. But still, fintech startups are struggling to get their place in the competitive markets. They are facing ample amounts of challenges that make them think about whether they can stand to customer expectations. Here’s why:
Lack of capital
Working capital is the lifeline of every business. And the same can be also said about the FinTech startups. So if you are not having adequate capital, chances are there that you can fail.
Running a FinTech startup is very expensive as it involves a lot of tools, legal regulations and manpower. Also, you need to attract the latest technologies and new candidates in your business which may increase your costs. Apart from this, you also have to incur the costs of hiring a legal advisor to understand the regulations that govern the finance industry.
So for avoiding the above issues, you must carry out detailed market research. Make a business plan that covers every single business cost. Figure out the strategy to keep your business going on for a long time.
Inadequate market research
Market research is vital for every business while starting its operations. You first need to understand the current fintech trends of 2021 and analyse it properly before starting your operations. For this, you need to get a thorough understanding of your competitor’s offerings. Also, have to know your competitor’s weaknesses and the loopholes in their products.
Complicated payment process
Payment processing time plays a vital role in the success of a payment solution. Nobody likes to keep waiting in this rapid business world. So if your payment process is lengthy and time-consuming, then your customers will surely like to reach out to your competitors.
To stop this thing from happening, you should make your payment process simple so that making payments can be easier for your customers. For that, you can think of using robust digital FinTech solutions for accepting payments. Due to these solutions, customers can easily pay you by using a digital wallet, credit card or a debit card.
Choosing an inefficient FinTech solution provider
To meet the increasing customer demands, you need to integrate top-notch solutions into your FinTech business. For this, you can hire a skilled Fintech solutions provider or a FinTech solutions company that can make a remarkable IT strategy for you to influence the financial ecosystem. Apart from this, a solution provider will also provide you with additional skills that can help you to address the customer demands more efficiently.
However, if you hire an incompetent solution provider for your business then you cannot harness the benefits of a digital FinTech solution at its full potential. Also, an inefficient developer or a team can affect the quality of your solutions adversely.
Selecting the wrong venture capitalists
The FinTech industry is the sector where the quality of service and experience matters the most. That is why many new FinTech startups prefer to raise funding from experienced venture capitalists so that they can have the understanding and experience of the markets that they are going to deal with. This is an important decision for FinTech startups as it is going to be with them for a long period.
But if a FinTech startup goes to some bank or insurance company, then it will be tough for them to get money as these organisations are having rigid and outdated procedures for granting loans. So before getting investment, FinTech startups must ask their investors about the type of reporting, regulatory procedure, and type of information they will require.
Lack of a proper MVP strategy
Let us say that you made a fantastic product but want to buy it. Can this happen? Well yeah, this can. Consumer behaviour is an unpredictable thing. So for avoiding last-minute failures, it is important to check out your FinTech solution properly and assure that whether it works well for your customers.
A minimum viable product or MVP is a solution that contains basic or limited features. It helps the development team to understand the performance of the app and also allows them to make changes to the app if needed. That is why FinTech startups should not underestimate the importance of MVP.
Make a structured MVP road map to strategize your FinTech solution through deep thinking. Also, ascertain the value that your solution can provide your customers. So this is how a well-planned MVP road map helps you to achieve your business goals in minimal time.
Overlooking the legal aspects
Before entering into the markets, Fintech businesses need to understand the laws concerning FinTech businesses. These laws include the anti-money laundering laws, KYC norms, PSD2 compliances, and anti-terrorist funding laws. However, some Fintech startups are unaware of these regulations. This lack of legal knowledge can create risks for your product before its launch.
So the FinTech startups should get a better understanding of the existing regulations of the payments market. For this, FinTech businesses cover all the legal aspects while developing the business plan. Also, you should get knowledge of licensing laws before developing a Fintech solution.
Customer adoption challenges
Customer adoption is considered one of the few challenges for FinTech startups as people are hesitant to accept new technologies. Still, many FinTech startup owners think that customers are eager for using digital finance solutions as they are keen to use social apps, but this is not the case.
FinTech solutions are still not having a wider adoption rate in the markets. Many people are still not ready to use the latest FinTech and banking technologies due to illiteracy or misconceptions. Moreover, they are comfortable with traditional payment modes. Thus, there is no incentive here for making change.
However, Fintech startups have to create awareness among their customers about using digital FinTech solutions for making payments. Also, they have to show customers to use computers and e-commerce platforms.
Conclusion
A lot of planning and research and many big decisions are needed to carry out a FinTech business, but with courage and the ability to move, you may be able to find yourself at the top of the list.
So if you have an amazing Fintech business idea or you are already having a FinTech startup then you need to avoid these 8 mistakes that hinder your business growth.
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