How to start a fintech company

What is a fintech company?

A fintech company is a startup that deals with financial services, such as lending or payment, or generally any service that comes to mind when you think about banks. Fintech is the new wave of financial service delivery technology, and it’s here to stay.

With technological advancements reshaping financial services, there’s never been a better time to launch your own fintech company. Whether you’re an entrepreneur with a groundbreaking idea or a seasoned professional seeking to disrupt traditional finance, the opportunities are vast and ripe for exploration.

However, starting a fintech company comes with its unique set of challenges, from navigating regulatory requirements to building a secure and user-friendly platform. In this blog, we’ll guide you through the essential steps to turn your fintech vision into reality. From market analysis to app development, we’ll equip you with the knowledge you need to successfully launch and scale your fintech venture. Ready to embark on this exciting journey? Let’s dive in!

Types of fintech company

• Insuretech: Insurance companies are known for their conservative approach to risk management and long-term investments. They can be considered a fintech company because they use information technology to manage risk, but this is not the core business of most insurance firms. Some insurance firms deliver their services directly to consumers through mobile apps or via USSD.
• Lending fintech companies: These businesses provide loans or other financial services to individuals and small businesses digitally. They have credit scoring mechanisms that leverage AI and data analysis to understand the creditworthiness of their clients. They also take advantage of technology to remotely verify user identity and asses their risk levels. 
• Payments: A payments company provides money transfers between users’ accounts in real-time using software applications like Venmo or PayPal. This mode of payment moves people from using physical cards and cash money to paying digitally using apps or even sim cards as experienced in east Africa through M-pesa. 
• Digital cards provider: Some fintech companies major in issuing digital cards. This is a solution that enables users to pay internationally while using digital cards. It is a service that can be offered by other fintech companies as an add-on to its clients.

It is worth noting that these are not the only types of fintech companies that exist. There are many we have left out including group savings, group lending, investment fintech, and trading fintech companies. The list goes on and on. 

What does it take to start a fintech company?

To start a fintech company, you’ll need to have a creative idea and be able to execute it. Having an idea is the easiest part. Anyone can come up with brilliant ideas. Execution is what separates the successful from the failures. It takes proper planning and execution for the idea to work. Take your time, to punch holes in your idea and plan until you come up with a masterpiece.

You also need to have strong team members who are passionate about what they do and committed to making it happen. If the team is weak and not committed, you can only do much. Like any other startup, the road will be tough, especially in the early days. For this, you will need a resilient team that is hungry for success and believes in your dream. Do not entertain mediocrity.

Additionally, you must be able to pivot and change direction when necessary so that your vision remains clear in the eyes of those around you. If your vision doesn’t fit well with those around you or if people start questioning whether or not this is really worth pursuing, then there’s no hope of success! 

Financial projections are another thing that should factor into any decision-making process as you start your company. You need to test your financial model and run it by a financial specialist to see if the idea is even viable. Factor in things like your target market, their financial abilities your markups, and turnover periods and see if it really makes sense. If it does, well and good. If it doesn’t go back to the drawing board.

Finally, understanding how regulations work in fintech is important. You’ll want someone familiar with the laws so they can advise on which ones apply to you. You will need a legal advisor to help you in compliance and operate within the set guidelines. They will even help you seize opportunities by taking advantage of what the law dictates. This is one area that you might want to overlook but it will always come back to bite you in the back. Before starting your fintech company make sure that you have a legal advisor behind you.

Where do I start as a fintech entrepreneur?

• Start with a business plan. Draw a nice plan and see if it makes sense. The best part is that you can be agile with this process. Iterate the plan until when you fill comfortable and then move to the next step.
• Get a legal structure in place: A company is a legal entity that can own assets and make decisions on behalf of shareholders. Make sure that you involve your legal advisor at this point so that you file for the correct licenses.
• If you are a tech person and intend to do the development yourself, create a minimal viable product and test it with real users. Is it working? Are the users enjoying your product? Does it solve a real problem? Are these users willing to pay for your product? If all the answers are “yes” then you are ready to form a team and move to the next level.
• Put a team together and delegate duties. It is now time to gain some traction. A little marketing and networking with potential clients/partners. Set up your company online. Buy a domain name and make your website your billboard. Most people will Google your company immediately after you make an introduction. I.e if they are interested. So you need to make sure that your online presence is appealing especially if you will move forward with the next step.
• Once you have enough traction and you want to scale, you are now ripe for funding. Note that funding is not necessary especially if you are generating enough money to sustain yourself. However, you can decide to raise funds if you want to scale fast. If you decide to fund rise, be ready to give out a portion of your company to the investors.

The next thing that you need to do is to consider the company leadership. If you don’t think you have the necessary skills to be the company CEO, you can always hire an experienced leader. However, you can also take up the role and learn as you go. After all, the company is still young and you are the vision bearer.

Starting a Fintech in 8 Easy Steps

1. Analyze the Market
Before diving in, you need to understand the market. Research your competition, identify trends, and find out what problems your fintech solution will solve. Look at customer pain points and see where your offering can stand out. This step is critical for identifying your niche and setting the foundation for your business.

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2. Draw a Plan
Once you have a clear understanding of the market, create a business plan. Outline your goals, revenue model, target audience, and marketing strategy. A solid business plan not only guides your journey but also attracts potential investors. It helps ensure you’re clear about how your fintech will operate and grow.

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3. Create a Design
Now it’s time to design your fintech product. Focus on creating a user-friendly, intuitive design. In fintech, trust is essential, so your design must be simple, clean, and reliable. Work with UI/UX designers to ensure your app is easy to navigate and visually appealing to your target users.

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4. Build the App
With the design in place, you’ll move into the development phase. Hire skilled developers to build your fintech app. Choose the right technology stack and ensure your app adheres to security and regulatory standards, which are crucial in fintech. At this stage, make sure you prioritize scalability and reliability.

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5. Test the App
Before you release your app, it’s crucial to thoroughly test it. Conduct user testing to identify any bugs, usability issues, or security vulnerabilities. Testing should involve real users to provide insight into potential problems before launch.

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6. Release the App
After testing, it’s time to release your app to the public. Launching your fintech app can be done via app stores or directly to your website. Make sure you have a marketing strategy in place to get the word out and attract early users.

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7. Collect Feedback
Once your app is live, collect feedback from your users. Listen to what they like, what they find difficult, and where improvements can be made. This will help you understand how your fintech solution is performing in real-world conditions and identify areas for improvement.

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8. Iterate and Maintain the App
Fintech products require constant updates to meet evolving user needs and industry standards. Based on user feedback, continue to iterate and improve your app. Keep an eye on new regulations, security enhancements, and technological advances to ensure your product remains competitive and relevant.

What makes a good fintech CEO?

• Good communication skills
• Visionary and innovative
• Leadership ability
• Strategy and market understanding
• Strong team player
• Time conscious
• Strategic thinker

While a CEO should exhibit the above characteristics, it does not mean that lacking in some of them or all is a limiting factor. So long as you have the will and ability to learn, nothing should stop you. The important thing is to understand your strength and weaknesses. This is important so that you can capitalize on your strengths and work on your weaknesses.

What does a fintech company need to get funded?

We briefly mentioned funding earlier. It is a topic that you can’t avoid as a startup especially if you don’t have all the capital beforehand or if you want to scale quickly. Getting funded is a headache for most startups, leave alone fintech. Only one out of ten startups get funded and survive to the series A stage. This should tell you how keen investors are while picking a startup to invest in. Several pointers can be considered while preparing for fundraising:

• Your business plan needs to be solid. But don’t just focus on the numbers and projections. You also need a clear vision of what kind of company you want to be, how it will operate, and why people should care about your product or service. This is where having a good team comes in handy. You’ll want them all working together on this project from day one.
• You will also need to prepare your legal documents too, in case the investors need them for due diligence. Company ownership documents and any other licenses that you might have acquired will be necessary.
• Ensure that you always have a presentation deck ready. The presentation should clearly state what problem you are solving and the solution that you are offering. Show how unique your solution is, compared to the rest. Don’t forget to include your ask. Else what is the point of the presentation?
• A clear financial plan will set you apart from your competitors. Make sure that you have your budget in place. Show how you will spend the money that you intend to rise. Additionally, make sure that you have your financial projections with you.

Current Fintech market trends

Current Fintech Market Trends (Simplified)

• Fintech is growing fast: According to a 2023 report by BCG and QED Investors, the global fintech market is expected to grow from $245 billion in 2021 to $1.5 trillion by 2030—a massive six-fold increase.
• Still early stages: Experts at BCG believe fintech is just getting started, and while it’s growing rapidly, it still has a long way to compete with traditional banks.
• Huge potential: By 2030, fintech’s share in the global financial services market could grow from 2% to 7%, representing $21.9 trillion.
• Key players: North America, the UK, and the EU are currently the biggest markets driving fintech growth.

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Trends Shaping Fintech (by PayU)

1. Cross-border payments:
   Fintech companies are finding ways to make international payments faster and cheaper. With the rise of global e-commerce, this trend is growing fast.
2. Payment system innovations:
   As competition heats up, fintech companies are embracing new technologies like crypto. Businesses must adapt to modern payment solutions to stay relevant.
3. Security and fraud prevention:
   As more people buy online, security is a top concern. In 2022, e-commerce lost $41 billion to fraud. Companies must ensure their platforms are safe to win customer trust.
4. Transparency:
   Customers want clarity, especially with loans and credit. Fintech firms that provide transparent pricing and clear terms will gain trust, especially in today’s tough economy.
5. Green fintech:
   Environmental sustainability is slowly entering fintech, but it’s still in the early stages. As regulations tighten, fintech companies embracing green initiatives will stand out.

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Key Stats on Fintech Growth

• Stripe: Valued at $50 billion, it’s the second-highest valued private company in the U.S., after SpaceX.
• Klarna: Has raised over $3.5 billion in equity funding since 2010.
• Global funding: Since 2017, $115 billion has been raised by 250 fintech startups.
• Global presence: While many fintech giants are U.S.-based, 40% come from the UK, India, Brazil, France, Nigeria, and other regions.

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Future Outlook

• The fintech market is expected to grow at a rate of 20.5% per year until 2027.
• Opportunities for innovation are huge, especially for startups that solve real pain points for their customers.

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Key Considerations for Fintech Startups

• While fintech products share some similarities with other software applications, they face additional challenges around security, compliance, and user trust.
• Make sure your technology stack is robust, and consider the regulatory landscape from the beginning.

How to raise capital for my fintech startup

Raising capital for a fintech startup can be challenging due to the highly competitive and regulated nature of the financial technology space. However, with the right approach and preparation, you can attract the funding needed to scale your fintech business. Here are several strategies to consider:

1. Bootstrapping
   Self-funding your fintech startup through personal savings or early revenue is a great way to maintain full control over your business. Bootstrapping allows you to grow organically without giving up equity, and it also demonstrates commitment and reduces initial financial risk for future investors. Early revenue from services or a minimum viable product (MVP) can be reinvested into the business.
2. Angel Investors
   Angel investors can provide an early injection of capital in exchange for equity. Many angels are interested in fintech due to its potential for innovation and high returns. Look for angel investors with experience in fintech, as they can also provide valuable industry connections and guidance. You can network with angel investors through platforms like AngelList or at fintech-specific events and conferences.
3. Venture Capital (VC)
   Fintech startups, especially those with scalable models, are attractive to venture capital firms. VCs often look for high-growth potential, clear market demand, and an innovative approach to finance or payments. To raise capital from VCs, you need a solid pitch deck, a strong team, a scalable product, and a clear path to profitability. Identify fintech-focused VC firms and research their portfolios to find those aligned with your startup’s vision.
4. Strategic Partnerships with Financial Institutions
   Many banks, payment processors, and other financial institutions are keen to invest in fintech innovations. Strategic partnerships can provide both capital and access to infrastructure, market distribution, and customers. Partnering with financial institutions can also offer validation, opening the door to additional investors who value industry backing.
5. Fintech Accelerators and Incubators
   Joining a fintech-focused accelerator or incubator can provide initial capital, mentorship, and networking opportunities. These programs often invest in startups in exchange for equity or offer funding in exchange for participation. Programs like Y Combinator, Techstars (specifically their fintech cohort), and Barclays Accelerator offer access to investors and industry experts, helping you refine your product and business model.
6. Crowdfunding
   Platforms like Crowdcube, Seedrs, or Republic are becoming popular avenues for fintech startups to raise capital through equity crowdfunding. This allows you to raise funds from a large number of small investors in exchange for shares in your company. Crowdfunding can also help you validate your business idea, build brand awareness, and engage with potential customers.
7. Initial Coin Offering (ICO) or Security Token Offering (STO)
   If your fintech startup operates in the blockchain or cryptocurrency space, you can consider raising capital through an ICO or STO. These fundraising methods allow you to sell tokens or digital assets to investors, typically in exchange for cryptocurrency. Be aware that regulatory requirements for ICOs and STOs can vary significantly depending on your jurisdiction, so legal compliance is essential.
8. Government Grants and Fintech-Specific Funding
   Some governments and organizations provide grants or special funding opportunities for fintech startups, especially those focusing on financial inclusion, innovation, or regulatory technology (RegTech). Research fintech-specific grants in your region and apply for programs that support innovative solutions in finance. These funds do not require repayment or equity exchange, making them a valuable option.
9. Bank Loans and Venture Debt
   Traditional bank loans or venture debt can be options for fintech startups with predictable cash flow or assets. Fintech businesses in later stages of growth may find these funding methods beneficial for scaling operations without diluting ownership. Banks that understand fintech may offer tailored loans, but it’s crucial to have a solid financial track record and a detailed repayment plan.
10. Pitch Competitions and Fintech Events
    Participating in pitch competitions and fintech conferences can expose your startup to potential investors while offering an opportunity to raise capital. Events like Money20/20, Finovate, and Slush attract fintech investors and venture capitalists looking for disruptive solutions. Winning or even participating in these events can lead to funding opportunities, media exposure, and strategic partnerships.

How much does it cost to start a fintech company?

Starting a fintech company can be a costly endeavor, with expenses ranging anywhere from $70,000 to millions of dollars, depending on the scope, complexity, and geographic context of the business. For a conservative estimate, let’s break down how you could budget a lean $70,000 startup, while keeping in mind that some fintech solutions could require far more depending on regulatory requirements, product development, and growth plans.

Here’s how you might allocate a $70K budget:

1. Product Development and Technology ($30,000 – $40,000)
   The heart of any fintech company is its technology, whether it’s a mobile app, web-based platform, or blockchain solution. This is where a significant portion of your budget will go. A lean product development process might look like this:
   • MVP Development: Building a minimum viable product (MVP) with basic features and functionality. Hiring a small team of developers (in-house or freelance) can cost between $20,000 and $30,000, depending on the complexity of your platform.
   • UX/UI Design: A good user experience is critical in fintech, as customers expect seamless, secure interactions. Budget $5,000 to $10,000 for professional UX/UI design, ensuring your platform looks and feels trustworthy.
   • Software Licenses/Tools: Depending on the tools you use for development (e.g., cloud services like AWS, APIs for financial data, etc.), this can range between $2,000 and $5,000 in the early stages.
2. Legal and Regulatory Compliance ($10,000 – $15,000)
   Fintech operates in a highly regulated space, so ensuring legal compliance is non-negotiable. Key legal and compliance costs include:
   • Incorporation Fees: Incorporating your company, setting up a corporate structure, and handling initial paperwork may cost around $1,000 to $2,000, depending on your jurisdiction.
   • Licensing: Fintech startups often need specific licenses (like payment processing or lending licenses), which can range from $5,000 to $10,000.
   • Legal Counsel: Hiring a lawyer familiar with fintech regulations is crucial to help with contracts, terms of service, and privacy policies. This could cost between $5,000 and $10,000, depending on the complexity of your business.
3. Marketing and Customer Acquisition ($5,000 – $10,000)
   Even with a lean budget, you need to make some noise about your fintech solution to attract early users. Here’s how you could allocate marketing funds:
   • Digital Marketing: A mix of social media ads, Google ads, and content marketing will help build your online presence. A budget of $2,000 to $5,000 can get you started on platforms like Facebook, LinkedIn, or Google.
   • PR and Launch: Allocating $1,000 to $3,000 to public relations efforts (press releases, media coverage) and attending key fintech events can help build awareness.
   • Community Building: Invest around $2,000 in early-stage community building through email campaigns, webinars, or partnerships with industry influencers.
4. Operational Expenses ($10,000)
   Running a startup comes with ongoing operational costs that can quickly add up. A basic breakdown might include:
   • Office Space: If you’re opting for remote work, you can keep this cost low. However, if you need co-working space or a small office, budget $1,000 to $3,000 for early-stage operations.
   • Salaries and Contractors: If you have a lean team, you’ll need to cover basic salaries or stipends for a few key hires (developers, marketing personnel). Set aside $5,000 to $7,000 for initial payments to contractors or part-time hires.
5. Security and Data Protection ($5,000)
   Trust is everything in fintech, so you’ll need to invest in security measures to protect user data and transactions. While enterprise-grade solutions might be out of budget, you can implement robust security features early on:
   • Encryption and Security Software: Investing in encryption technology, SSL certificates, and basic cybersecurity tools will cost around $3,000 to $5,000.
   • Security Audits: A third-party security audit to test your platform’s vulnerabilities is a wise investment, which could range between $2,000 and $5,000.

Total: $70,000 (Estimated)

This budget is for a lean, early-stage fintech company focused on getting a minimum viable product to market, ensuring compliance, and attracting initial users. As the company grows, additional capital will likely be needed to expand the platform, enhance security measures, and scale customer acquisition efforts.

While $70,000 can get you started, keep in mind that as your business grows, you will need to invest significantly more in areas like data infrastructure, customer support, and compliance as regulations evolve. For more ambitious fintech startups, raising funds from investors, angel groups, or venture capitalists will likely be necessary to scale and compete in a highly dynamic market.

How can I find the right advisors for my fintech startup?

Finding the right advisors for your company can be a challenge. You need someone who has done it before and has a proven track record of success, as well as someone who is a good fit for your business goals and values. Make sure that the person you choose doesn’t have too many other commitments so that they can dedicate time to helping you build your fintech startup into something successful.

Such people do not seek you out. You need to make an effort on your end to reach them. Luckily, they are quite many on LinkedIn. All you need to do is reach out and explain yourself. Also, you can network with your potential mentors on network events. Attend as many events as you can in the fintech space and pick the right advisors for your company.

What Are the Most Successful Fintech Companies Globally?

Here’s a quick look at some of the top fintech companies making a global impact:

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1. Stripe
Founded in 2010, Stripe is a financial infrastructure platform for businesses. Known for its easy-to-use API, Stripe simplifies online payments for startups, SMBs, and large enterprises alike. Valued at over $50 billion, Stripe supports millions of businesses globally, from small e-commerce stores to giants like Amazon.

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2. Square (Block, Inc.)
Founded by Jack Dorsey in 2009, Square started as a small mobile payment solution for merchants and has since evolved into a full-scale financial services company. Square provides everything from payment processing to business loans, and its Cash App has grown in popularity, giving users a range of personal financial tools.

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3. Ant Financial (Alipay)
A Chinese fintech giant, Ant Financial is the company behind Alipay, one of the world’s largest digital payment platforms. With more than 1 billion users, Ant Financial handles a massive volume of transactions daily, particularly in the Chinese market. It also provides services like wealth management, insurance, and lending, making it a multi-faceted player in the global fintech ecosystem.

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4. Nubank
Brazil’s Nubank is the largest independent digital bank in the world, with over 85 million users across Latin America. Founded in 2013, Nubank revolutionized the banking experience by offering no-fee credit cards and mobile banking, appealing to millions of users who were previously underserved by traditional banks.

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5. Polygon
Polygon is a decentralized blockchain platform that enhances the scalability of Ethereum, making transactions faster and cheaper. Its native token, MATIC, powers the network, which is widely used for decentralized finance (DeFi) applications and NFT marketplaces. With its innovative scaling solutions, Polygon has become one of the key players in the crypto and fintech space.

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6. Safaricom (M-Pesa)
Safaricom, a leading telecom company in Kenya, launched M-Pesa in 2007, revolutionizing the way people in Africa send and receive money. M-Pesa allows users to transfer money, pay bills, and access credit through mobile phones. It has transformed financial inclusion in Africa, with over 50 million active users across the continent. M-Pesa is considered one of the most successful mobile money solutions globally.

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These companies demonstrate how fintech is reshaping the global financial landscape, providing innovative solutions in payments, banking, and digital currencies. From the U.S. to China and Africa, these fintech giants are pushing the boundaries of technology and finance.

How can I protect my ideas from being stolen?

While you may not want to patent your ideas, there are other ways to protect them. You can use non-disclosure agreements (NDA) or confidentiality agreements with employees and clients. These types of documents allow you to keep the information confidential, as long as it doesn’t violate any laws or regulations. For example, if a company wants a list of all the patents currently held by your company and what they’re used for, then an NDA would likely be required before providing this information to them.

Make it a habit to safeguard your ideas through patents. Have an advisor on the same if necessary. Your intellectual property today can be your biggest asset tomorrow. Handle it with the seriousness it deserves.

How long should my runway be as a fintech startup?

While it’s important to have a solid business plan, you should also consider how long you can survive without funding.

In the case of fintech startups, funding is vitally important because they need money to get started and continue operations. It’s estimated that there are more than 5 million fintech companies worldwide today, but only about 2% of them will actually survive beyond their first five years in operation.

If your company doesn’t have any revenue yet, think about how much time it would take for your product or service to become successful enough that people would pay for it—and then build up from there. Do some research on existing products in this niche area and see if those businesses are profitable enough. Compare the findings with your company to see if eventually, you will be profitable enough once customers start buying regularly from you.

The baseline is, after all, is said and done, you will need to budget accordingly. A 12-month budget is a good place to start if you are fundraising or making profits. However, you should always consider the worst-case scenario.

The finances of a fintech startup are crucial

The finances of a fintech startup are crucial to its success.

Fintech companies often have higher burn rates and lower margins than other startups, which means they need more money in order to grow. This can be tricky for investors who want their investments returned quickly. However, it’s also important for the company’s survival because if you don’t have enough cash on hand then your business won’t be able to keep going. 

It is important to know that Fintechs are highly regulated in terms of how they invest and how they use money that they collect from the public. A keen eye should be put on the finances else you will find yourself in trouble. 

Conclusion

From the start, you’ll need to find advisors who can help you navigate the complex legal landscape of fintech. If you have a great idea but no access to capital, don’t worry! There are plenty of ways to get funding even if you don’t have an MBA or fancy business degree. If you do want access to capital, however, consider speaking with investors who specialize in early-stage startups like yourself: angel investors or seed funders. See you in the unicorn startup world!!

I know I have left out a lot of information regarding fintech startups and how to start one. Feel free to add your views in the comment section. I also hope you believe in sharing as much as I do. If you find this information valuable, kindly share! Share! Share!