The Fin-tech industry is gaining grounds and steadily disrupting the marketplace of traditional financial institutions in the delivery of financial solutions. According to a survey done by PricewaterhouseCooper, the retail banking and payments sectors will be the most disrupted by a group of new companies building financial technology (Fin-tech) solutions.
The survey stated that retail banking and fund transfer have the highest chances of disruption at 92% and 85% respectively, especially as Fin-tech companies are changing the competitive landscape and blurring the lines that define players in the sector. The services they offer, range from taking advantage of the latest mobile, digital and cloud technologies, alternative lending and providing enabling technologies for financial institutions.
There has been a big buzz around this shorthand ‘Fin-tech’ since a wave of financial technology companies emerged in 2008 using the internet, mobile devices and cloud technologies to improve the quality of banking and investment services. Fin-tech is multifaceted; it includes the consumer-facing that offer digital tools to enable individuals to manage money and finance startups efficiently, while the back-office ventures work behind the scenes, helping financial institutions streamline their operations.
Like every other emerging industry, new business owners need to give it careful thought and planning before jumping on the bandwagon. Here are some things to consider before launching a fin-tech start-up:
- There is a stiff competition between financial institutions and fin-tech companies. The banks are more concerned about the way we do banking and scared of losing their customers. In order to beat the competition, since the banks have the assets, they can either partner with the fin-tech companies or buy them out. Before jumping into the fin-tech space, you have to be sure you have what it takes to compete effectively with the big players.
- Many tech companies are more security conscious especially with the rise in cyber attacks and data breach. Customer trust is the live-wire of financial institutions, falling prey to cyber crime and losing customers’ data is a definite way of losing their trust and patronage. Many people are also skeptical about signing up to digital financial services and are wary of doing any business transactions with fin-tech services that are not fully grounded. The onus lies on you as a financial service provider to guarantee your clients maximum security of their financial information in your custody.
- Unlike other tech ventures, a professional level of financial, technological and business expertise is required to build a sustainable fin-tech company. You also need a legal aid to tackle all the compliance requirements it comes with. To build a strong team, you need talents from different areas of competence in order to stand out and offer something unique in value. The fin-tech industry is becoming flooded and many fin-tech startups are now focusing on providing services such as budgeting, personal finance, investment, insurance and more. The essence of branching out is to offer customers new ways of doing things while solving their problems at the same time.
- Funding is a major subject of discourse for any start-up and building a tech company is not cheap. When your venture is a partnership between two experts, it’s easier for them to shoulder the entire process of product and business development. However, many people are still optimistic because the funding available for fin-tech companies is high and in 2016, the global venture capital investment was $17.4 billion in the industry. However, this adrenaline rush means that competition for funding just got fiercer.
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