FinTech Startups Are Changing The Way We Perceive Financial Services

November 22, 2021 | Raj Srivastav

To what extent has the pandemic digitized our lives? Zoom replaced offices, virtual marriages substituted grand weddings, smartphones became the gateway to festivities, and we really didn’t miss going to banks. Courtesy FinTech, a kind of technological finance and now an inseparable element of modern banking, our lives were never quite put on hold.

For the uninitiated, FinTech has changed the way we pay, borrow, lend and invest. Typically, FinTech start-ups leverage technology to automate and improve the delivery of financial services at affordable costs through mobile apps or well-designed platforms.

What furthers the allure of FinTech is the broad breadth of its tools: web-based payment options, cloud computing, peer-to-peer lending, wealth management, digital currencies, foreign exchange and remittances, insurance services, and whatnot. It’s also called the ideal digital bank for traveling owing to the attributes of zero fees on international purchases as well as ATM withdrawals and no added conversion or mark-up fees.

It’s not about survival of the fittest anymore, but rather who is the smartest and most agile. FinTech is definitely smart and agile. Emails have killed postcards. And now, FinTech startups seem to be pushing aside banks and credit card companies.

Essentially, FinTech – a term first used in 1980 by the then news editor of the Sunday Times, Peter Knight, to illustrate the fusion of finance and technology – relies on a wide range of technologies to enhance customer experience such as:

Numbers speak glowingly of the proliferation of this new-age digital platform. According to data provider CB Insights, US FinTechs raised $12.8 billion in the first quarter of 2021, a 220% increase over the same period in 2020. It’s estimated that the global FinTech market will grow to $190 billion by 2026.

The mushrooming of FinTech startups is a story in itself. The Statistica claims that as many as 8,775 FinTech startups were registered in the US in February 2020.

In the success stories of startups such as Revolut, Starling, Monzo, and Wise, we celebrate the digital economy.

But what is a FinTech startup? In essence, a FinTech startup competes with traditional financial service providers by offering an infinitely better experience and efficient solutions to resolve existing problems. That’s what has driven the popularity of the world’s most celebrated FinTech startups: easy, flexible interface and responsive to customer requirements.

Look at the way these FinTech startups (listed below) have scaled the peaks.

Resolute ‘Revolut

After an $800 million funding round in July 2021 that took its valuation to $33 billion, Revolut became the most valuable UK tech startup ever. It offers banking services such as currency exchange, debit cards, virtual cards, stock trading, cryptocurrency, commodities, bank accounts, peer-to-peer payments, and allied services.

Sterling ‘Starling

Starling is a digital bank also based in the UK offering current, business, and personal accounts. It was started by Anne Boden in 2014 and received a banking license in 2016. Starling was valued at around $1.5 billion in March after a funding round from Fidelity and the Qatar Investment Authority.

Going ‘Monzo

Founded in 2015, Monzo became a pound unicorn with a valuation of £1 billion within three years. It allows free ATM withdrawals overseas and also offers international money transfers through its tie-up with Wise. Monzo has an active community forum consisting of customers as well as employees, which has contributed to real-time feedback and product improvement.

Wise’ choice

Wise, formerly called TransferWise, is an online money transfer service with debit card offerings as well. Wise achieved a valuation of $5 billion in 2020, with an aim to bring down international money transfer costs. Relying on a peer-to-peer and crowdsourcing approach, Wise has been able to drastically reduce transfer charges.

Perhaps, you too are eager to be written in the same sentence as the names above. The moot question is: how to start a FinTech startup or build a digital bank like Revolut and others like them?

Target a niche market

Having the right direction is essential. You might want to offer financial services to the underbanked or be a formidable name in mobile banking.

Engage the best

Build a strong team with domain knowledge. You sure wouldn’t cut corners when it comes to hiring the top financial app developers. Finding a cost-effective development partner is paramount.

Funding is the key

Be it through bank loans, venture capital, or bootstrapping, you must be adequately financed. Prepare a powerful pitch deck such that you get funded.

Don’t ignore the regulations

There are many laws governing FinTech such as Anti-money Laundering (AML) policies, Know Your Customer (KYC), and The General Data Protection Regulation (GDPR) among others. Ignorance of regulations can hurt even great business empires.

Yes, profit is why a business is in business, be it digital transformation technology or selling candy in front of retail stores. While it’s natural to ask yourself ‘how to build FinTech apps like Revolut?’, is the business profitable at all?

How does Fintech make money?

It’s undeniable that digital transactions have exploded following the pandemic. Payments across the world have substantially shifted online. While many FinTech firms have relied on crowdfunding and venture capital initially, their user base has developed enough to start generating profits on their own.

Digital wallets, peer-to-peer lending, and online payment processing enable firms to charge fees from users as well as merchants and vendors who use their platforms. Fees may be charged on a flat basis or as a percentage of the transaction value.

Revenue also comes in through third-party services and advertising. For instance, Wise recently reported quarterly revenue of nearly $183 million, a growth of 25% year-on-year. The high growth was because of increased customer numbers attracted by lower transfer costs which, Wise said, fell to as low as 0.62%. Wise was still able to rake in millions due to its huge global user base making it like a bank for expats.

With the right FinTech startup ideas, diligent execution, and backed by suitable technology, you too, as a FinTech entrepreneur, can go a long way.

Here to stay

The pace at which technology penetration is happening across industries, FinTech is going to be around a long time. An idea has taken shape and has burst through our lives in a spectacular way. Don’t hesitate to contact us if you, as purveyors of new financial technology and banking apps, aspire to be a top FinTech business. In order to do so, you need to hire a qualified FinTech software development company. Our team of experienced web developers is only too willing to support and see you expand. You can reach us at +1.408.621.8481 to get started.

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