What You Need To Consider Before Building a Fintech Product
Finance is one of the oldest industries along with medicine and law, and one of the latest to have been influenced by technology. This influence simplified how people interact with traditional financial institutions. Financial technology (or simply fintech) is a popular area among young entrepreneurs who are trying to increase the usability of financial products by making them more user-friendly.
However, designing an intuitive and easy-to-use application doesn’t guarantee the success of a fintech product. In this article, I will reveal the pitfalls that await anyone who has decided to start a fintech product.
- Consider the target country
The goal of fintech is to substitute for traditional financial institutions by delivering more effective methods of engaging the masses in financial activities. All institutions, bodies, and services (except cryptocurrencies) are regulated by governments. That’s why it’s difficult to introduce a new way to coordinate financial services.
Study the laws of your target country before you start your fintech business. It will help you minimize the losses by complying with the existing rules of a particular financial sector. Otherwise, you may be subject to resistance from the government, which may impose fines or forbid you to do fintech business. To make it less severe, 8 countries have launched a regulatory sandbox — a framework set up by financial center regulation that will provide testing of new fintech products under the government’s supervision.
It’s not only fintech that must comply with strict state policies. Healthcare business in the US is regulated by Health Insurance Portability and Accountability Act (HIPAA). It’s a law that requires all businesses that work with protected patient information to implement certain safeguards to ensure the safety of the data. So if you think about, fintech isn’t that bad.
Study the laws of the targeted financial sector or hire a professional. Otherwise, you may even not launch.
2. Find a team with experience in developing the fintech products
Working in fintech can be a pain in the ass because the industry in full of jargon which most IT specialists are unfamiliar with. In each fintech business, there should be somebody finance-literate to make sure that the technical team understands everything right. It’s rather easy to confuse debits and credits, what else to say about area-specific terms. When the technical team is taught about, say loans, you will avoid possible misunderstandings.
Moreover, the more experience a team has with a particular financial sector, like investments, the less chance they have to make a mistake. So if you manage to find a professional fintech development company, you will (a) save money because your team will be knowledgeable about the project; and (b) accelerate the process because you won’t have to explain the jargon to the team. I’m not saying that each member of the technical team has to have a degree in finance, but it’s great if the tech lead of the senior engineer is familiar with the subject matter.
But even if your team isn’t acquainted with finance, you can always teach them. You could organize regular workshops to teach them the relevant information. It may include your vision of the domain and the issues that your start-up is going to solve. We had such workshops when we were developing MoneyPark, an online mortgage service. They set up a few recurring workshops for the development team and so everybody learned the terms and felt confident about the area.
3. Choose the technology
Unlike traditional financial institutions, fintech product can easily change, come up with additional services and adapt to various need of the users. To find the right market fit you need to deliver your service on time. As Don Norman pointed out in The Design of Everyday Things ‘Some products never reach the market because it’s not the right time for them’. To make it in the right time, you need to be sure about the technology you’re going to use. Whether you release the product on time highly depends on the flexibility of your fintech product.
Chances are that you’re unfamiliar with various technologies required to create a fintech service. I’d suggest you trust the professionals when making the choice. It will depend on various factors including your business goal, technical restrictions imposed by the technology, and the time required for the development. If you choose wisely, you will minimize the risks of ceasing the project if the government introduces a new law and you need to adhere to it.
Different programming languages are rumored to fit best for particular purposes. One of them is Python, and according to HackerRank, it’s the #1 language for fintech products. And according to the their 2018 Developer Skills Report, Python is among TOP-3 languages for financial services in general and other complex industries like healthcare, security, transportation, etc.
When using the Django framework, the engineers can build an MVP in a few months and so you will launch rather quickly. Remember the previous part? You need to be on time with your product. This industry tolerates no delays.
Python is highly flexible — it allows you to adapt and change the products as much as you need in the course of the development.
4. Consider possible integration with third parties
Creating a game-changing fintech product doesn’t exclude its dependency on established financial institutions and their regulation. Since fintech is aiming to improve the user experience with financial products, it needs many integrations with third-party services. By integration I mean various APIs, support channels, and tools required to implement the desired solution.
Molo, an online mortgage system, allows users to choose houses they like, contact the owners, and send a request to an authorized organization, like Experian in the UK, to verify property and the identity. All this is possible due to multiple services built into the application. Because of these integrations, Molo is a fully digital mortgage provider. It means that users don’t need to visit multiple institutions to get a mortgage unlike when doing it the traditional way.
To implement each integration requires facing the bureaucracy of financial institutions, thus delays. The most common issue is the 9 to 6 working day. The APIs and support are available only within this timeframe so plan your schedule carefully. The tricky thing about third-party integrations is to make the users think that everything works 24/7, with no breaks, independently.
5. Think about both roles
Assume applying for a loan. There are two participating roles: somebody gets a loan, another gives it. In insurance, there’s an insurer and an insured. Fintech is the same in terms of roles: products are built as platforms with different functionality for different roles — users and service providers.
Clear Minds, an online investment advisor service developed, allows access to their product for all financial advisors. In this way, the reach both B2B and B2C segments — working with end users (people who want to invest and need help) and service providers (financial advisors who suggest best options for investments). Platform-based products require different interface and functionality depending on the role a user chooses.
Consider the roles your fintech product provide and what functions each role will be able to perform.
6. Have a product owner and communicate
I’m proceeding with my ideas from Part 2.
Fintech is a combination of two major fields: finance and technology. To ensure the successful launch of a product that adheres to the state’s laws, is user-friendly and easy to use, you will need a product owner experienced in both fields. There are too many pitfalls a fintech start-up may fall into. A product owner will be responsible for following all regulations imposed by the state’s financial insinuations as well as managing the fintech software development process. Except for the product owner, proper communication also predicts success.
It doesn’t mean that you will 100% succeed but the more transparency between you and your technical team, you easier it’ll be for you to understand each other, and therefore follow the product requirements.
If you follow my advice prior to starting a fintech product, chances are that you will avoid lots of mistakes common to young financial entrepreneurs. First, find a product owner to connect you and your technical partners. Find one with experience in both finance and IT. After that, study your target sector and the state’s law regarding this sector. In this way, you will better understand the nuances of your future project.
Remember that fintech has to deliver the product at the right time, in the right place, to the right people. Choose Python over other programming languages to ensure a fast MVP that will bring you closer to your goal. It’s a fun journey that is waiting for you to stop reading and get your act together.
Read more about building fintech products on Django Stars blog.