The year 2015 seems to become the year of rising fintech startups. Many still believe that small innovative companies that developed a neat piece of software will never substitute the leviathans conventional banks are. But all market trends show otherwise. Everything goes for IT entrepreneurship: payments, transferring funds abroad, loans, wealth management, investment advisory, brokerage and even insurance. Banking institutions themselves feel the breath of fintech startups down their neck and do their best to keep up with the rapid metamorphoses of the predatory digital world.The financial crisis and its consequences have changed the beliefs about how financial systems and economic agents behave. Ninety per cent of all data in the world was created in the past ten years, thus an increasingly wide range of data sources and analytical tools can be used to improve the stability of financial system and broaden the access to finance.
The good news is that to gain success when starting up a fintech project you don’t necessarily need to be as disruptive as in any other sphere. Often, it is enough to take any conventional financial service and use technology to make it more convenient and handy. How should it be done? We have made up our minds to reveal five key opportunities, potentially five key factors that can lead your humble fintech startups to a multi-billion business.
Banking services have often been out of reach for a big segment of population. This has been happening for many reasons among which we can name: unacceptable cost of the services, various legal restrictions, remote geographical locations, etc. Those who advocate for financial inclusion consider financial technology a part of the solution to help people gain access to finance and have a large variety of financial services available at moderate prices.
Here’s an example: statistics shows that in the developing world only 41 percent of people have a bank account, but out of the 2.5 billion people who have no access to a traditional bank, 1 billion do have cell phones. First fintech startups providing mobile banking have shown themselves as the most convenient way to take care of money for people in remote areas. And those startups are still augmenting the profit for their founders.
What we are trying to say here is that the eternal question for every business “Where shall I get my customers?” is not that crucial for fintech!
With the financial crisis of 2008 and the appearance of the Occupy movement, after large bailouts for ‘too big to fail’ banks and the revelation of many let’s say ‘not quite fair’ banking policies, traditional financial system has suffered a drastic dearth of trust from its customers. A lot of people just don’t want to deal with those fattened swindling ‘bankstars’. They insist on more transparency in the financial system. A growing demand for less vertically hierarchical, more flatly distributed and decentralized economy and finance is taking place. Here is the high time for fintech to embark on the mise en scene. And that is by the way how the rising vogue for blockchain technology can be explained.
So there is really nothing too complex here. Provide financial services, build trust, ensure the highest possible transparency standards and we guarantee that you will be able to compete with banks and lure their clients.
This is one more sweet area to challenge stuffy banking practices. The rotten bureaucracy of large financial institutions minimizing their exposure to risk, different legal restrictions – all these dramatically affect the decision making time and, as a consequence, the speed of providing services. And this is not only about the process of debiting one bank account and crediting another! Increased speed in any financial operation brings benefits obvious for almost anyone. Just imagine the way how real-time payments, accounting and reporting could potentially reduce fraud and money laundering, provide greater control over liquidity for companies or simply boost the economic turnover.
Take your advantage – use technology to be the fastest!
Banking business is very costly. Thousands of employers, sophisticated IT systems, smart headquarters, branches and affiliates, a whole bunch of different forecasting, scoring and screening systems and so on—require income. Just think for a second: every single fee you pay for any financial service covers the costs of all those endless features that are very unlikely to bring you any personal benefit.
Blow off all that useless tinsel and you will be able to offer a fair price that beyond any doubt will attract customers.
5. Attractiveness for investors
And finally – the cherry on your cake! Moneybags have really gone wild investing in financial technology. Can you imagine – companies and fintech startups in fintech sector have tripled (!!!) the amount of raised investment for a year solely! Last year, they attracted $12 billion, up from $4 billion the year before. In one of its articles, The Economist is quite rightful calling fintech “the hottest spot in a bubbly funding environment for startups”.
So… The place is London and the time is now!