I have a fun job. I get to meet/talk to entrepreneurs with interesting ideas and loads of energy. And yes, all of it is not fun because I also meet bankers, incumbent FIs and some sharks as well. Anyhow, the important thing is that I get to learn and meet several people who are either planning to start their own FinTech company or have already started developing some sort of a FinTech product/feature. One common trend is that they need help (not too much but at the right moments), lots of encouragement and some advice. I felt that it was important to identify the things that they should consider so that they become successful in the long run.
[Note: These turned out to be 10 in number while I was writing. And everyone who writes such articles would want to believe that these are 10 commandments. But they are not, I could be wrong.]
1. Let’s begin at the ideation (product/market) stage. “Always target where it hurts more.”
– The big problem to solve: If you are going to spend the next 2–20 years of your life running after an idea, it better be big. In 2014, the US insurance industry wrote new policies worth $1.1 trillion in net premium. That’s big. As they say, “Go big or go home.”
– Where technology can do miracles: Gone are the days when a company would win by re-packaging products (smaller sachets of shampoos or bigger mouth of the toothpaste tube) or finding a new distribution method (multi-level marketing). From business models, the world is moving to IP stacks. Disruption is being brought not by payments experts, but by technology experts and people passionate to utilize technology for a better experience for end-users. Innovation is coming from techies rather than business professionals—companies like Venmo, Square, Stripe, Braintree and many others to name a few. Those disruptors came from a tech background and wrote a lot of code to make their point.
– Where incumbents don’t offer a fair deal: High interchange fees; no loans to people who don’t have a file or who don’t have credentials; almost every area of insurance has complex fee structures that are difficult to comprehend for consumers.
– Where there is no given loyalty: The churn is at an all-time high in many financial services. Less sticky ones are good targets.
2. Talk to banks and incumbent FIs. They are not your enemies anymore.
Progressive banks have shown great interest in FinTech. They don’t consider FinTech to be a threat in all cases; instead, they feel that working along with FinTech firms can solve some major issues that exist in the system. Today, banks are engaging with the FinTech startup community through several engagement models:
– Investment: Venture units of banks are investing in startups in various areas such as blockchain and robo-advisory services.
– Hackathon and startup contests: Banks are conducting hackathons to identify teams that can help them with fresh ideas, to reduce cost and can help in improving end-cu