In the past 6 years, fintech start-ups have revolutionised the manner of payments in India, such that currently, people are not considering carrying a wallet in the markets. Moreover, the necessity to go contactless has further proliferated the usage of fintech payments. According to a joint study by Boston Consulting Group (BCG) and the Federation of Indian Chambers of Commerce and Industry (FICCI), fintech is expected to reach USD 150-160 Bn by 2025, resulting in a USD 100 Bn value creation opportunity.
The fintech landscape in India at its peak of value creation that is exploring and expanding its offerings to new geographies, new consumer cohorts like- teenagers, millennials, and Gen Z, cryptocurrencies, money transfers, loans for small businesses, investments thus not limiting itself to online payments only.
We Indians are spoiled with the ‘The more the Better’ ideology. With the penetration of smartphones and falling data plans in rural India, it presents a host of opportunities in the fintech space to mushroom fintech companies to create disruptions in money matters.
This story presents a checklist for the aspiring entrepreneur who wants to launch their fintech company.
According to a joint study by Boston Consulting Group (BCG) and the Federation of Indian Chambers of Commerce and Industry (FICCI), fintech is expected to reach USD 150-160 Bn by 2025
Things to Keep in Mind Before Starting a Fintech Company
Regulations in Fintech Sector
Payment and Settlement Systems Act (2007)
No fintech company can run its operations in India without the prior authorisation of RBI. This law is the principal legislation that governs the payments regulation.
Guidelines regulating P2P Lending Platforms
Fintech companies that are Peer-to-Peer Lending Platforms, should prescribe the lender exposure norms and borrowing limits concerning the operations of P2P lending platforms in India under Peer-to-Peer Lending Platform Directory 2017.
According to section 45-IA of the RBI Act, no NBFC can initiate or carry on the business of a non-banking financial institution without obtaining the certificate of registration from RBI. The Reserve Bank of India Act of 1934 governs all NBFCs. According to its regulations, any organization providing fintech services in India will have to be registered by the RBI.
Selecting the Domain
Fintech is a vast industry with several domains to serve your offering. After we select a domain to plunge into the fintech space, it is equally important to decide upon the specific audience that we will be catering to based on – geography, country, state, city, age group. There should be no ambiguities regarding the target audience and the problem that we will be solving.
Here are some of the popular domains for a fintech company to launch its offerings in –
- payments and international money transfers
- personal finance management
- mobile banking
- trading and investments
- financial products for small businesses (e.g., accounting or tax services)
- data analysis and financial decision making
- cryptocurrencies and blockchain-based solutions
After selecting the niche, find out about your competitors. This helps to unleash the X-factor or how exclusively your company’s offerings can solve the problems of the target audience. Understand what your competitors are lacking, because every gap is an opportunity for your company to grow and gain the first-movers advantage. For instance, BharatPe operating in the payments space found out that small offline retailers are devoid of a platform that enables them to accept digital payments from any UPI payment app, which other apps like Paytm, PhonePe did not touch upon.
Having the right kind of talent in the workforce is the key to the success of a fintech company. However, for a new company hiring an experienced workforce with expertise in app development, cybersecurity can be difficult due to limited capital. For a start-up beginning new, they can consider hiring an offshore software development team or professionals with specific domain knowledge or relevant experience at a reasonable cost.
Building the tech Stack
Building the right tech stack is the fuel for the fintech company. The use of big data, machine learning, hackers, coders, databases, programming languages, and frameworks will offer a seamless user experience. Apart from experience, cybersecurity remains a major concern. According to PwC’s Global FinTech Survey 2016, almost 56% of the respondents identified information security and privacy as threats to the rise of fintech. As more services go online, data sharing and privacy pose a threat to fintech.
Ensure that the cybersecurity of fintech apps, websites, payment platforms is top-notch and sensitive data should be encrypted and stored in the cloud.
Run extensive testing to check the source code for any vulnerabilities and for all network connections, apply transport layer security (TLS), to prevent unauthorized API connections, and protect customer’s information with an HTTPS SSL certificate.
Remember that scene from TVF Pitchers where the guy himself becomes the product and sells himself to the potential investors, it was his presentation skills that attracted the investor’s attention. The fintech space has many players that are eyeing the investor’s wallet. While presenting to the investor, product demo and business propositions should be aligned to entice the investors.
Navigating the fintech business model safely
The Fintech Industry in India is neither nascent nor completely developed as yet the smartphone and internet connectivity is yet to reach the remote parts. For a fintech start-up to remain relevant, it would require the right tech stack to effectively solve the financial pain points of people. Therefore, the emphasis goes on owning a workforce with strong technical skills and superior domain skills that will result in the success of a fintech company.