FinTech is short for ‘financial technology’ – the central concept is digitization and structural change within the financial services sector.
The largest segment in the market is digital investment, with $112.90 billion total transaction value expected in 2023. In 2024, there’s expected to be a revenue growth of 22.9% in the digital investment segment.
But what does this mean for your FinTech business over the coming years? How can you manage a FinTech business successfully in the current climate? Read on for some tips and advice.
1. Capitalize on the role of Bitcoin and cryptocurrency in the FinTech industry
There is only one place to begin, and this is with cryptocurrency. After all, Bitcoin and other coins have been taking the world by storm in recent years. However, if you’ve not really delved into this market, you may be wondering what is a Bitcoin? And, why does it matter in terms of your FinTech company?
Bitcoin is a kind of digital currency that enables consumers to make transactions online without needing a bank or another intermediary.
What makes Bitcoin unique is that it’s decentralized, meaning no organization or government controls it. Instead, every transaction is verified and recorded on the blockchain, which is a public digital ledger.
So, what does this mean in terms of the FinTech industry? Blockchain is a critical driver of effectiveness and efficiency in a FinTech company, which is largely dependent on analysis and computations.
Because of the huge advancements in information technology over the past years, the world today has powerful infrastructure that covers every continent and country, enabling us to harness rapid Internet to improve and facilitate financial processes.
While it’s still in its infancy in regards to centralized financial institutions adopting FinTech, the FinTech revolution is flourishing, as consumers across the world are increasingly selecting Blockchain-powered cryptocurrency transactions to streamline their transaction and payment procedures.
FinTech businesses can now focus on providing efficient and competitive financial services to their customers more securely and quicker, owing to decentralized cryptocurrency and blockchain technology.
2. Continue to test and iterate
Your customers’ needs and pain points may evolve as time goes on, so it’s imperative to scale and adapt as required.
When you set your product up, we’re sure you’ll have a specific goal in mind and a certain issue you’re looking to solve, for example, helping users to manage their day-to-day finances or their taxes effectively.
However, once you roll out the product, and you start analyzing the results and testing it, you may realize that some elements work whereas others are met with a lukewarm reception.
So, you need to delve deeper and truly understand what consumers want. This will enable you to evolve your FinTech product so that you can deliver more value and drive better results.
No matter how good your business is, testing and iterating is imperative.
3. Formalize your strategy for customer acquisition
As with any new business, your go-to-market approach and marketing will have a considerable role in determining the success of your business.
You may be able to benefit from some word-of-mouth awareness and organic adoption, but it’s also vital to have a formal strategy for customer acquisition to ensure that you grow your consumer base.
Make the most of the relevant marketing channels available to you so you can reach your target consumers. Determine which approaches and channels will have the most impact in terms of your specific audience, and continue to experiment with your awareness and marketing strategies to find out what works best.
Owned channels, such as your product dashboard, website, social media, blog, and emails, are easy and free to experiment with. Other channels, for example, display ads, retargeting ads, and paid search, demand more investment so you’ll need to figure out your budget before pursuing avenues like this.
4. Diversify your revenue streams
If there’s one thing that the pandemic taught us, it’s that you need to diversify your income streams. You never know what’s around the corner that could derail your income and put your chief earning source at risk.
FinTechs, like all other companies, must be profitable, or at least, have a clear road to profitability. Depending on the sort of FinTech company you’re operating, there are a number of monetization levers you can control. Some of these are as follows:
- Mark-up money-movement services – Mark up the expenses of different money-movement services, for example, currency exchange, wire transfers, and accelerated access to funds.
- Service fees or subscription fees – Charge consumers a recurring fee for membership plans or subscription plans in exchange for access to your services or offerings.
- Earn fees on funds held – If you enable consumers to store funds, you can earn fees as a share of the funds you’re holding. This entire revenue can be captured, you can share it with the consumer, or some sort of combination of both.
- Lending – Another option is to make money by offering loan products and charging interest and origination fees.
- Interchange – If you provide any sort of card product, you may be able to keep a portion of the interchange fees that are generated for each card transaction.
A lot of FinTechs leverage multiple revenue streams to diversify their income and enhance the profitability of their company.
You can also test out different monetization strategies so you can see where most of your revenue is being generated from over the long-term, adjusting this accordingly to your strategy.
5. Prioritize data protection
Our final piece of advice when it comes to managing your FinTech business is to concentrate on data protection. Around 60% of financial institutions are currently at risk of a data breach, so it’s imperative that you put data protection at the top of your list of priorities. If you don’t, you could find yourself being a victim of one of these catastrophic events.
You need to make sure your product is secure and that you encrypt and store sensitive data in the cloud effectively. Leaked sensitive data can be used for blackmail, theft, or further fraud, and this is one of the biggest security concerns in the FinTech space at the moment.
To make sure that you have top-level FinTech cybersecurity in place, run extensive testing to check your source code to see if there are any vulnerabilities. You may want to consider hiring a professional penetration tester for this.
A penetration tester is someone who will ethically hack your system. They’ll get to the bottom of any vulnerabilities in your network, enabling you to patch them up before a cybercriminal takes advantage of them for malicious purposes.
Furthermore, for every network connection, you should apply transport layer security (TLS), protect your clients’ information with an HTTPS SSL certificate, and prevent unauthorized API connections.
You also need to pay close attention to how you build your FinTech infrastructure and choose a cloud platform wisely. You need a solution that provides you with a strong defense against DDoS attacks, as well as backing up your data so that you can get back online quickly and efficiently if there are any disruptions to your network.
On the side of your clients, you should make the most of multi-factor authentication. This means that your client will need more than simply a password to access their account. Instead, they’ll need to get through another layer of security, for example, a fingerprint or a code that they receive to their mobile phone.
You should also have a stringent password policy in place. Customers should be required to establish complex passwords, which they change on a frequent basis. Aside from this, fingerprint scanning and face recognition options can combine high-level data protection and convenience.
It’s important to get the balance right. You don’t want to force customers to jump through hoops. At the same time, security is critical. If you get the balance right, customers will feel assured while enjoying the user experience you provide them with.
Follow these tips to ensure your FinTech business soars in the coming years
So there you have it: some tips and advice to follow to manage your FinTech business effectively.
From diversifying your income streams to making use of the blockchain, there are many steps you can take to manage your FinTech company effectively and ensure your business flourishes.
