How To Start A FinTech Company?

Do you want to start a fintech company?

Call it a fintech startup, a fintech company, or a business, in today’s trillion-dollar market; it has become a lucrative opportunity for many.

With more than 30,000 fintech startups, a number that is growing, it’s high time to go for it.

However, entering the super competitive market can be difficult. After all, there’s much more to starting a fintech startup than what meets the eye. And if you want to become the next best, you need to understand every step.

Contrary to popular belief, there is a huge difference between developing a fintech app and starting a fintech company.

Though related, app creation is just a part of it.

We shall be discussing all about it, meanwhile let’s start with a market overview and a brief introduction.

Let’s get right into it:

Ever Growing Market for Fintech, the Future of Finance

Fintech statistics paint a quite colorful picture of a booming market, with thousands of startups and billions in revenue.

This is what attracts so many people to create a fintech startup.

• The global market valued at $179 billion in 2023, driven by 30,000 startups.
• China leads in adoption with 90% using fintech banking.
• Global financial sector projected to reach $26.5 trillion by 2022 (6% CAGR).
• Visa is the top player, valued at nearly half a trillion USD.
• Fintech unicorns hold a significant (1%) shares in the global financial market.
• Potential disruption of $4.7 trillion in traditional financial services revenue seen by fintech.
• Banks and credit unions increasingly embrace fintech partnerships (60% and 49% respectively).
• Digital payments dominate the market (25% share).
• Asia is a major fintech hub with (24% global deals in Q2 2022).
• AI and machine learning are widely used in fintech (90% of companies).

Amazing, right? Well, the impact of fintech on businesses is huge. However, if you want to start your own fintech company, it’s a good idea to understand the concept to its roots first.

Let’s do just that below.

Understanding the “Fintech Company” Business Idea

In the rapidly evolving world of finance and technology, the concept of a “fintech company” has become increasingly prominent.

So, what is a “fintech business”?

At its core, a fintech company, or financial technology company, leverages technology to enhance or automate financial services/processes.

This fusion of finance and technology has paved the way for more efficient, accessible, and often more affordable financial solutions for both businesses and consumers alike. Fintech businesses can range from mobile banking and insurance to investment apps and peer-to-peer lending platforms.

The essence of these companies lies in their innovation to solve traditional financial challenges.

Thus, improving user experience, and democratizing access to financial services. This has not only opened up new avenues for consumer convenience but also sparked a surge in financial startups looking to carve out their niche in this burgeoning industry.

Creating a fintech startup begins with a solid understanding of the financial sector’s pain points and an innovative idea to address them.

So, let’s look at different type of fintech business in the section below.

Startup Ideas: Types of Fintech Businesses

To start a fintech company of your own, you need an “fintech app idea”.

Well, to even imagine coming up with a concept, you first need to understand different forms of fintech businesses or what we call a niche.

You see, the industry is vast and diverse, encompassing a wide range of businesses that leverage technology to enhance or innovate financial services.

So, let’s look at these different types:

1. Digital Banking and Neobanks

Fintech is changing the banking industry

This time, it’s with digital banking solutions and Neobanks platforms.

These fintech businesses aim to redefine traditional banking by offering online-only financial services that eliminate the need for physical branches.

They focus on user-friendly interfaces, lower fees, and often provide features like budgeting tools and real-time notifications.

2. Payment and Money Transfer Services

One of the most common ideas for a fintech company is to start an eWallet startup.

And it is also one of the best.

This category includes companies that facilitate easier, faster, and more secure payments or money transfers, both domestically and internationally.

They often target inefficiencies in traditional banking systems, such as high transaction fees and slow processing times.

3. Peer-to-Peer (P2P) Lending

P2P lending platforms connect individuals who want to lend money with those who need to borrow, bypassing traditional financial institutions.

This can lead to more favorable terms for both parties and opens up lending to a wider audience.

Another popular and growing variation in lending is BNPL.

4. Personal Finance Management

Personal finance management is an up and coming niche in fintech.

These fintech startups offer tools and apps that help individuals manage their finances, budget, and invest.

For instance, it includes budgeting apps, expense manager app, as well as financial literacy platforms.

They often include features like expense tracking, financial goal setting, and personalized financial advice.

5. InsurTech

Launching an insurance app is a good fintech business plan.

Standing at the crossroads of insurance and technology, InsurTech companies aim to disrupt the traditional insurance industry.

You can do this by offering innovative insurance models, personalized policies, and streamlined claim processing through technology.

6. RegTech

Regulation Technology (RegTech) focuses on leveraging technology to streamline compliance and regulatory processes within the financial industry.

This is particularly crucial given the complex and ever-evolving regulatory landscape that fintech companies navigate.

With the growing importance of digital payment regulations and rules, this is a good idea.

7. Blockchain and Cryptocurrency

Blockchain development is growing super popular.

This segment includes companies that use blockchain technology to offer services like cryptocurrency exchanges, digital wallets, and decentralized finance (DeFi) platforms.

They focus on providing secure, transparent, and efficient alternatives to traditional financial systems.

8. WealthTech

This is a rather new form of fintech platform.

WealthTech startups focus on making investment and wealth management accessible to a broader audience.

They offer services like robo-advisors, online brokerage platforms, and automated investment tools.

9. Crowdfunding Platforms

Want to launch a crowdfunding platform?

Well, you aren’t the only one as this is one of the most popular fintech startup company plans.

These platforms allow individuals and businesses to fund projects or ventures by raising small amounts of money from a large number of people, typically via the internet.

This model has revolutionized how startups and creative projects secure funding.

Each of these fintech business types represents a unique approach to solving traditional financial challenges, offering ample opportunities for entrepreneurs keen on starting a fintech startup.

Identifying the right niche involves understanding market demands, regulatory landscapes, and technological advancements to create a fintech company that can thrive in the competitive financial sector.

Moving on, it’s time to focus on “why”.

Why Start a Fintech Startup in 2024?

People ask what a fintech business, how to start a fintech startup, but a question even more common than those is,

Why start a fintech business?

In 2024, fintech is one of the most lucrative industries in the world, fintech attracted people to invest in app development.

Let’s see how and why:

• Growing Demand for Digital Financial Solutions

The demand for digital financial solutions is experiencing explosive growth.

According to Grand View Research, the global fintech market is projected to reach a staggering $32.17 trillion by 2028, with a Compound Annual Growth Rate (CAGR) of 23.42%.

This exponential growth signifies a massive and ever-increasing consumer appetite for innovative financial tools and services.

Existing giant platforms like PayPal, boasting over 429 million active accounts as of March 2022 (Zippia), serve as a testament to the widespread adoption of digital payment methods.

This trend highlights a clear shift in consumer behavior, indicating a preference for convenient and efficient ways to manage finances.

• Increasing Mobile Banking Penetration

Smartphone penetration continues its relentless climb, with Statista reporting over 6.6 billion smartphone users globally in 2023.

This widespread mobile device ownership creates fertile ground for mobile-first fintech solutions that cater to on-the-go banking needs.

Furthermore, a report by App Annie indicates that finance apps saw a significant 45% increase in user engagement in 2023. This data underscores the growing comfort and preference for managing finances through mobile applications.

Fintech startups that leverage this trend by developing user-friendly and secure mobile banking solutions are well-positioned to capture a significant share of the market.

• Evolving Regulatory Landscape

Regulatory bodies are starting to recognize the immense potential of fintech and are actively creating frameworks to foster innovation in the sector while simultaneously mitigating risks.

This shift towards a more supportive environment is a positive development for legitimate fintech startups.

For instance, the Open Banking Implementation Entity (OBIE) in the UK has facilitated secure data sharing between banks and third-party providers. This initiative has led to a surge in innovative financial products and services, demonstrating the positive impact of well-designed regulatory frameworks.

As the regulatory landscape continues to evolve, fintech startups that prioritize compliance and stay abreast of regulatory changes will be best placed to navigate this environment and achieve sustainable growth.

Also Read: Fintech Regulations and Rules

• Niche Opportunities in Underserved Markets

The traditional financial system may not always be equipped to cater to the specific needs of every demographic.

This presents a significant opportunity for fintech startups to focus on niche markets that are currently underserved.

For instance:

Globally, an estimated 1.7 billion adults remain unbanked, according to the World Bank.

This vast population segment represents a potential market for innovative solutions that promote financial inclusion.

Fintech startups can develop accessible and user-friendly financial products and services tailored to meet the needs of the unbanked population.

And

SMEs often face challenges accessing traditional financial services, such as loans or specialized investment options.

Fintech startups can address this gap by offering tailored lending products, accounting solutions, or cash flow management tools specifically designed to cater to the needs of SMEs.

• Technological Advancements

Emerging technologies like Artificial Intelligence (AI), Blockchain, and Big Data are revolutionizing the financial landscape.

One of the main reasons to create Fintech startups is that you can leverage these advancements to create innovative solutions that enhance the user experience and address current limitations within the financial industry.

Here are a couple of promising applications of these technologies:

• AI-powered Financial Advisors: AI-powered financial advisors can personalize financial advice and investment strategies for users, making these services more accessible and affordable. This can empower individuals to make informed financial decisions and potentially improve their long-term financial well-being.
• Blockchain-based Solutions: Blockchain technology offers significant advantages in terms of security, transparency, and efficiency. Fintech startups can utilize blockchain to develop solutions for areas like cross-border payments and trade finance, streamlining processes and reducing risks for all parties involved.

While the prospects for fintech startups in 2024 appear promising, it’s crucial to acknowledge the challenges that also exist within this dynamic industry. These challenges will be explored in a separate section to provide a comprehensive overview of the fintech landscape.

Steps to Start a Fintech Company

With all that said and done, let’s see how to start a fintech company.

It’s complex, it’s long, but it’s rewarding.

While mobile app development is at the core of a fintech startup, there’s much more to it as we shall be discussing in this section.

So with this being said, let’s get right into it:

Step 1: Market Research and Analysis

First things first, you’ve got to really get to know the playground you’re stepping into.

Market research.

This means digging into what’s already out there, spotting the gaps, and sizing up the competition.

It’s all about asking, “What’s missing?” and “How can we do this better or differently?” Think of it as laying the groundwork for your fintech startup.

Step 2: Define Your Value Proposition

Now, it’s time to zoom in on what makes you stand out.

What’s that special thing you’re bringing to the table? This step is all about clarity — making sure you can say, in a sentence or two, why someone should choose your fintech solution over anything else.

It’s your secret sauce, your magic ingredient.

Step 3: Regulatory Compliance and Legal Framework

Here’s where things get a tad serious, but in a good way.

The fintech world is tightly knit with regulations, and for a good reason. You want to ensure that your venture is playing by the rules from the get-go.

It’s a good idea to buddy up with legal experts who know the fintech landscape inside out.

They’ll help you navigate the maze of compliance, so you’re all set to operate smoothly.

Step 4: Secure Funding

Unless you’ve got a money tree in your backyard, you’re going to need some financial fuel to get your idea off the ground.

Funding is the soul of the project.

This could mean bootstrapping, seeking out angel investors, or maybe even crowdfunding.

Think about what makes sense for your startup and go for it. Remember, it’s not just about cash; it’s also about finding partners who believe in your vision.

Step 5: Define Your Product Vision

And now, we create a fintech application.

This is where you dream big.

What’s the ultimate goal of your fintech product? How do you see it evolving?

Sketching out your product vision gives you and your team a north star to aim for. It’s like drawing the map before you embark on the journey.

Step 6: User-Centric Design

Focus on fintech app design.

Your users are your rock stars. Design your product with them in mind.

What’s their journey like? How can you make their experience smooth, enjoyable, and, most importantly, useful?

This step is all about empathy — putting yourself in your users’ shoes.

Step 7: Choose Your Technology Stack

Now, let’s talk tech.

Choosing the right fintech tech stack is like picking the ingredients for a gourmet meal.

You want the perfect blend that brings out the best in your product. It’s about balancing innovation, reliability, and scalability.

Step 8: Implement Robust Security Measures

In the fintech world, security isn’t just a feature; it’s the foundation.

With all sensitive financial data involved, ensuring top-notch security is non-negotiable. Think encryption, secure APIs, and continuous monitoring. It’s all about building trust with your users.

Step 9: Develop Core Features

It’s time to roll up your sleeves and start building.

Focus on your core features — the essential functions that solve your users’ problems. Keep it lean at first; you can always add more bells and whistles later.

Remember: features can either make an app or break an app.

That’s why it’s so important to focus on selecting right features.

Step 10: Integrate Additional Services

Once you’ve got the basics down, think about what other services or features could complement your core offerings.

The market is filled with fintech APIs which you can use.

This could mean partnerships with other fintechs or integrating third-party services that enhance your user experience.

Step 11: Testing and Quality Assurance

Test, test, and test some more.

You want your fintech solution to be as bug-free and user-friendly as possible before it sees the light of day.

This step is all about ironing out the kinks and ensuring your product is ready for prime time.

Step 12: Launch Strategy

With all said and done, it’s time to launch the fintech application.

Launching your fintech product isn’t just about flipping a switch. It’s about creating buzz, building anticipation, and strategically introducing your solution to the market.

Think about the best channels and timing to make a splash.

Also Read: How To Launch An iOS App? & How To Launch Android App?

Step 13: Post-Launch Support and Updates

The launch is just the beginning.

Be ready to support your users, gather feedback, and continuously improve your product. Or in layman’s terms, app maintenance and support.

Keeping your solution fresh and up-to-date is key to staying relevant in the fast-paced fintech world.

Step 14: Marketing and User Acquisition

Last but definitely not least, it’s time to get the word out.

A great product deserves an audience. Tailor your marketing efforts to reach your target users effectively.

Whether it’s content marketing, social media, or partnerships, find a mix that works best for you.

It’s a process to make a fintech startup of your own.

Now, with this being said, let’s see what are some challenges that you should expect to see in the section below.

Challenges When Starting a Fintech Company

Starting a fintech company is undeniably exciting, but like any great adventure, it comes with its share of challenges.

So, here are some important lessons for fintech startups:

1. Navigating Regulatory Compliance

The financial industry is heavily regulated, and keeping up with these regulations can be daunting. Compliance is not just a hurdle; it’s a constantly moving target.

• Solution: The key here is to get cozy with the regulations that affect your niche. Don’t shy away from consulting with legal experts specializing in fintech. They can help you build a compliance-first approach, ensuring that your product is built on a solid legal foundation.

2. Securing Sufficient Funding

Fintech startups often require significant upfront investment, not just for development but also for regulatory compliance, security, and user acquisition.

• Solution: Craft a compelling pitch that clearly outlines the value and potential of your fintech idea. Explore various funding avenues, from venture capital and angel investors to crowdfunding and strategic partnerships. It’s also wise to start learning, focusing on your MVP (Minimum Viable Product) to prove your concept before seeking larger investments.

3. Building Trust with Users

In the world of fintech, trust is everything. Convincing users to trust your platform with their financial information is no small feat.

• Solution: Transparency is your best friend. Be clear about how you use and protect user data. Implement and showcase robust security measures. User education is also key; it helps your users understand the benefits and safety features of your platform through clear communication and responsive customer support.

4. Integrating Cutting-edge Technology

The fintech industry thrives on innovation, but integrating new technologies while ensuring reliability and security can be tricky.

• Solution: Stay on top of tech trends but be judicious in your choices. Focus on technologies that genuinely enhance user experience and operational efficiency. Don’t forget thorough testing and quality assurance processes to ensure that new tech integrations don’t compromise the stability or security of your platform.

5. User Acquisition and Market Penetration

The fintech space is crowded, and standing out to attract users can be challenging, especially when competing with established players.

• Solution: Focus on your unique value proposition and niche. Use targeted marketing strategies to reach your specific audience. Content marketing, strategic partnerships, and leveraging social proof (like testimonials and case studies) can be powerful tools to attract and retain users.

6. Keeping Up with Rapid Technological Advancements

The pace of technological change is blistering, especially in fintech. Keeping your product up-to-date without constant disruption can be a balancing act.

• Solution: Foster a culture of continuous learning and agility within your team. Stay engaged with the fintech community to stay abreast of new developments. Consider adopting a modular architecture for your product, making it easier to update or replace components without overhauling your entire platform.

7. Dealing with Data Security and Privacy Concerns

Data breaches can be catastrophic in the fintech world, eroding user trust and potentially leading to significant legal and financial repercussions.

• Solution: Invest in state-of-the-art security infrastructure. Regularly update your system and conduct penetration testing to identify vulnerabilities. Educate your users about securing their data and implement strict privacy policies that respect and protect user information.

8. Managing Scalability

As your user base grows, scaling your operations and infrastructure to handle increased demand without sacrificing performance or security can be challenging.

• Solution: Plan for scalability from the start. Cloud-based solutions can offer flexibility and scalability, allowing you to adjust resources according to demand. Regularly review your infrastructure’s performance and make proactive adjustments to accommodate growth.

Navigating these challenges requires a blend of strategic planning, technological savvy, and a relentless focus on user needs. By addressing these hurdles head-on with thoughtful solutions, you’ll be well on your way to building a successful fintech business that stands the test of time.

Top Fintech Businesses for Inspiration

One good thing about fintech market being so competitive is, there’s a lot of inspiration.

The world is filled with super successful fintech companies that are redefining market standards and generating more revenue than ever before.

So, let’s learn from them, how to be the next best.

► Stripe

Founded in 2010 by Patrick and John Collison, Stripe began as a simple solution for businesses to accept online payments via payment gateway integration.

Stripe quickly gained traction among developers and entrepreneurs.

Today, Stripe is a global phenomenon valued at over $95 billion, serving millions of businesses of all sizes, from fledgling startups to established Fortune 500 companies.

► Robinhood

Let’s talk about one of the best investment apps.

Launched in 2013 by Vlad Tenev and Baiju Bhatt, Robinhood revolutionized the stock market by offering commission-free trading of stocks, ETFs, options, and cryptocurrencies.

This made investing more accessible to a wider audience, particularly young and novice investors.

Robinhood’s user-friendly mobile app and gamified investing experience further contributed to its meteoric rise.

► Chime

Chime offers mobile banking services specifically designed for the digital age.

By focusing on a mobile-first approach and eliminating hidden fees, Chime has become a popular alternative to traditional banks, especially among millennials and Gen Z.

Their success highlights the growing demand for convenient and transparent banking solutions.

Needless to say, a lot of people want to create an app like Chime.

► Nubank

Nubank is a digital bank based in Brazil. It was Established in 2013 by David Vélez and Cristina Junqueira.

The digital banking platform has disrupted the Brazilian financial landscape by offering a 100% digital banking experience with no physical branches.

They provide credit cards, personal loans, and investment accounts through their user-friendly mobile app.

► Alipay

Founded in 2004 by Jack Ma, Alipay is a Chinese digital payment platform that has become a dominant force in the world’s most populous country.

It allows users to make online payments, transfer funds, and pay bills directly from their smartphones.

Beyond payments, Alipay has integrated various lifestyle services within its platform, making it an indispensable tool for many Chinese consumers.

Cost to Start a Fintech Company

Starting a fintech company can be an exhilarating venture, but it’s important to have a clear understanding of the potential costs involved.

The total expense can range significantly depending on the complexity of your product, regulatory requirements, and the market you’re entering.

To ballpark it, the cost to launch a fintech startup could fall anywhere between $50,000 to $500,000.

Here, the cost to develop fintech app would be anywhere between $25,000 and $150,000+.

Below is a breakdown of how these costs might be distributed across various needs and stages of development:

Now that we are done with this, it’s finally time to make some money.

How Fintech Business Generating Billions? Your Path to the First Million

One of the goals to start a fintech company is to make money.

But how do fintech businesses make money? Well, there are a lot of ways and in this section we shall be discussing “how” and “how much”.

These are, as mentioned below:

• Transaction Fees

One of the most straightforward ways to generate revenue in a fintech business is through transaction fees.

This involves charging your users a fee every time they make a transaction using your platform.

The fee can either be a fixed amount or a percentage of the transaction value. This model is particularly suitable for payment processing platforms, peer-to-peer lending platforms, and money transfer services.

The potential revenue from transaction fees can be significant, especially as the volume of transactions grows.

For instance, even a 1% fee on a $100 transaction from 10,000 users can bring in $10,000.

• Subscription Models

Subscription models offer a steady and predictable revenue stream, making them an attractive option for many fintech startups.

This model involves charging users a recurring fee, typically monthly or annually, for access to your platform or premium features.

It’s well-suited for fintech services that offer ongoing value, such as personal finance management tools, investment platforms, or business financial management services.

The potential revenue from a subscription model depends on your pricing and the value provided.

For example, a $10 monthly subscription fee from 10,000 users would generate $100,000 monthly, summing up to $1.2 million annually.

Also Read: Subscription Based Apps

• Freemium Models

The freemium model is a powerful way to attract a large user base by offering basic services for free while reserving advanced features or additional services for paying customers.

This model is ideal for fintech businesses that offer a broad range of functionalities, where basic services cater to the general public, and premium features target more advanced or professional users.

Examples include budgeting apps that offer free basic budgeting tools but require a subscription for investment advice or premium financial analytics.

Assuming a 5% conversion rate from a user base of 100,000 and a premium subscription fee of $10 per month, the revenue could be around $50,000 monthly, or $600,000 annually

• Interest on Deposits

A traditional yet effective revenue model for fintech companies, especially those operating within the digital banking and savings sectors, involves earning interest on user deposits.

This model works by investing user deposits in various financial instruments or lending them out, and the fintech company earns interest from these activities. The earned interest exceeds the interest paid out to users, and the difference represents the company’s earnings.

This model is particularly suitable for neobanks, savings apps, and investment platforms.

The potential revenue from this model can scale with the amount of deposited funds. For example, with an average 2% net interest margin of $50 million in deposits, a fintech could earn $1 million annually.

• Advisory and Consulting Fees

For fintech companies specializing in wealth management, personal finance, or specialized financial services, charging advisory or consulting fees can be a lucrative revenue stream.

This model involves providing personalized financial advice, investment strategies, and bespoke financial planning services for a fee. This model suits fintech startups that leverage expertise in financial markets, personal finance, or business financial planning.

For instance, a 1% fee on $100 million AUM would result in $1 million in annual revenue.

• Licensing and API Access

For fintech companies that have developed innovative technologies, data models, or financial algorithms, licensing their technology to other businesses or providing API access can be a significant revenue source.

This model is suitable for fintech firms with proprietary technology that can be leveraged by other financial institutions, startups, or even non-financial businesses.

The potential revenue from this model can be substantial, especially if the technology addresses a widespread need or can be integrated into various applications.

For example, charging $1,000 per month for API access to 1,000 businesses could yield $1 million in annual revenue.

Also Read: API Development

• Affiliate Commissions

Lastly we have, affiliate commission models that work well for fintech companies that can refer their users to other financial products or services, such as credit cards, loans, or insurance policies.

Each successful referral earns the fintech company a commission from the partner provider.

This model is particularly fitting for personal finance apps, comparison platforms, and fintech businesses focusing on consumer financial education and decision-making.

For instance, if a fintech earns an average commission of $100 per successful referral and manages 10,000 conversions in a year, it would result in $1 million in revenue.

Nimble AppGenie, Your Fintech Business Partner

Starting a fintech company is a lucrative idea.

How about you focus on the idea and growth, leaving the technicalities to us?

Nimble AppGenie is a market leading fintech mobile app development company and we have delivered hundreds of successful fintech solutions.

From DafriBank to CUT, Nimble AppGenie has proven time and time our technical prowess and dedication to delivering a successful solution.

Consult us today.

Conclusion

The financial technology (fintech) industry is experiencing explosive growth, with a projected market size of a staggering $32.17 trillion by 2028.

This surge is fueled by ever-growing demand for convenient and accessible digital financial solutions.

Traditional financial institutions, often slow to adapt, leave gaps in the market that fintech startups are perfectly positioned to fill. These nimble innovators can cater to niche markets, offering tailored services that resonate with specific demographics or address unmet needs.

From mobile payments and robo-advisors to blockchain-powered solutions and personalized lending platforms, fintech companies are revolutionizing the way we manage our money.

This dynamic landscape presents a wealth of opportunities for entrepreneurs with fresh ideas and a passion for disrupting the status quo.

If you have a vision for transforming the financial world, the booming fintech market might just be the perfect Launchpad for your innovative startup.

FAQs

Niketan Sharma

Niketan Sharma is the CTO of Nimble AppGenie, a prominent website and mobile app development company in the USA that is delivering excellence with a commitment to boosting business growth & maximizing customer satisfaction. He is a highly motivated individual who helps SMEs and startups grow in this dynamic market with the latest technology and innovation.