Is Fintech the Secret Weapon for Small Businesses?
Of course, you would agree with me that the finance sector has undergone significant changes over the years and with the ever advancing technologies, it is still evolving.
Now, come with me. Let's go down memory lane and have a quick flashback to some ten years ago…
At the time, financial services were characterized by slower transaction processes, limited accessibility, and a huge reliance on physical interactions and paper-based documentation.
But fast forward to the present day, you can now pay for your meal through your mobile phone or make money transfers from your home.
What changed?
I thought you might ask...
It is because, today, the financial sector has witnessed a couple of transformations that presented itself in the form of technology. This technology has blended into the financial sector and has created what is now called “Fintech”.
Let's dive deeper into all that this entails.
Wait a minute! Let us first look at how this fintech thing all began.
What is Fintech?
... fintech involves leveraging technology to enhance traditional financial services ...
Fintech, short for "financial technology", is the incorporation of a wide range of innovative technologies and services that aim to improve and refine financial activities to better consumer experiences.
Virtually, fintech involves leveraging technology to enhance traditional financial services, making them more accessible, efficient, and cost-effective for individuals and businesses.
Although the traditional banking sectors have long existed before the emergence of fintech, it has an edge over its predecessor. Fintech operates digitally, using technology to offer financial services online or through mobile apps, while traditional banking typically relies on physical branches for transactions and customer service.
Importance of Fintech
Here are some important aspects of fintech!
Convenience: Fintech operates online, providing quick and 24/7 services for easy accessibility.
Cost-effectiveness: Online operation allows fintech companies to reduce expenses, offering services at lower costs or for free compared to traditional financial institutions.
Global Accessibility: Digitized services enable consumers to access fintech products anytime, anywhere, simplifying cross-border transactions and investments.
Economic Growth: Fintech's global reach promotes financial inclusivity and fosters international opportunities, contributing to economic advancement and startup growth.
Risk Management: Fintech companies offer small businesses risk management tools like insurance products, fraud detection services, and cybersecurity measures, safeguarding their finances and assets.
Now that we have established that fintech controls a large part of financial services and that it determines a lot about the future of finance, let's look at the process for starting one of these businesses!
Characteristics of a Successful Fintech Business
The massive rise in the fintech companies is driven mainly by the convenience and security it offers users, giving access to transactions without cash or cards.
These are some of the characteristics successful fintech companies have in common, that you should be aware of when starting you business:
Successful fintech companies value their relationships with their customers by creating simplicity, convenience and accessibility in their products and services with the goal of providing a quality user experience. They take out time to study their customers and they focus on meeting their needs by providing personalized and user friendly solutions.
Another significant attribute of successful fintech companies is their ability to join forces with other companies, regulatory bodies and financial institutions with the aim of expanding their reach.
Fintech companies easily adjust to market changes, regulatory requirements and technological advancement.
They understand their market and their target audience which enables them to be creative in their marketing campaigns, this makes them different from other financial institutions.
If you really plan to establish a fintech startup, here are the few ways you would be helping reshape the landscape for other small businesses.
Access to Capital - alternative lending options such as peer-to-peer lending, providing small businesses with easier access to capital
Financial Management Tools - access to sophisticated financial management tools to manage their finances more effectively
Digital Payment Systems - digital payment solutions for small businesses, allowing them to accept payments online, in-store, or via mobile devices
Automated Accounting Software - automated accounting software that simplifies book-keeping and financial management tasks
Access to Global Markets - access global markets by providing cross-border payment solutions, currency exchange services, and international trade finance options
Quick Case Study - Revolut
Background and Success Journey of Revolut
Revolut is a United Kingdom based financial technology company which was founded in 2015 by Nikolay Storonsky and Vlad Yatsenko. The two former investment bankers were frustrated with the high fees and poor exchange rates associated with traditional banks, especially for international transactions.
Apparently, it was created to disrupt the financial industry by providing a range of digital banking services with minimal fees and transparent exchange rates.
It gained popularity among travelers and expatriates looking for a cost-effective way to manage their finances internationally.
Services Offered and Its Impact
Revolut offers a range of digital banking services to its customers. It provides features such as currency exchange, international money transfers, cryptocurrency trading, budgeting tools, and prepaid debit cards, all accessible through its mobile app.
Some of its additional services includes:
Currency exchange
International money transfers
Prepaid debit cards
Cryptocurrency exchange
Budgeting tools
Strategic Planning for Fintech Startups
The story of Revolut offers a ton of insight on what it takes to start a Fintech business. One thing that you should take note of in the fintech industry is that it is competitive. Establishing a fintech startup in any region is like sailing through uncharted waters.
However, you have a higher chance of succeeding if you are strategic and that could be possible by following these 5 processes.
Market Analysis: Understand the market landscape, including competitors, target audience, and emerging trends to shape the startup's direction.
Value Proposition: Clearly define a unique value proposition that addresses a specific pain point or need in the market. This is essential to stand out in a crowded fintech space.
Regulatory Compliance: Ensure compliance with relevant financial regulations and standards to build trust with customers and avoid legal issues.
Customer Acquisition: Develop effective strategies to acquire and retain customers to drive growth and revenue generation.
Scalability: Design the business model and infrastructure with scalability in mind to ensure that it can expand its operations and serve a larger customer base.
If you need to create a full blown business plan for your startup (and for your investors' sake) I suggest you read on!
Components of a Fintech Business Plan
Starting a fintech company involves several essential steps. As stated before, it's crucial to identify a specific problem or opportunity within the financial services industry that your fintech company aims to address. Once identified, defining a unique value proposition is essential.
Testing the fintech idea with potential users is also important to validate demand and gather feedback, often involving the development of a minimum viable product (MVP) to demonstrate viability and iterate based on user input. Building a competent team with the necessary skill set follows, ensuring you have the expertise needed to execute your vision.
Additionally, pitching the idea to investors who are willing to invest in the concept is crucial for securing funding and support. Lastly, never forget that compliance with regulations should never be neglected.
Remember.... you fintech business plan should include these elements as well:
Executive summary
You should have a concise overview of your fintech startup, summarizing its mission, vision, unique value proposition, target market, key objectives, and financial projections
Market analysis
Identify your target customers, their needs, preferences, and pain points, as well as key competitors and their market positioning.
Product and service offering
Your business plan components should contain a description of your specific fintech solution, emphasizing its technological features, benefits, and differentiation from competitors.
Financial projections
Forecast of revenue, expenses, cash flow, and break-even analysis to demonstrate the financial viability of your business.
Team and management
Introduction of your team members, showcasing their relevant experience and expertise to execute the business plan successfully.
Conclusion
The fintech industry is here to stay and it will forever be a game changer in the world of finances. It provides a range of benefits and gives leverage to small businesses.
The fintech space is a complex and rapidly growing industry, but there are still plenty more opportunities to come. Mentorship will help you build confidence, build your network, keep you updated with industry trends and much more.
With platforms like Micromentor, you as a fintech entrepreneur are at a bigger advantage of scaling! You will have direct access to experienced mentors who can provide you with guidance and the right relationships to help achieve all your business goals.
Are you hoping for a smooth ride into the fintech world?
Then taking a step forward with Micromentor is your best bet to a successful journey. Stretch out your hands and let a mentor help show you the way as you navigate the fintech landscape!
