Why Now is the Best Time to Start a Fintech Startup

Photo by rawpixel on Unsplash

Can you recall the last day when you haven’t heard the world “fintech”? Maybe a decade ago that could be an arousing term, but now, if you have been in the business long enough, that’s basically the only direction where companies are moving towards. Whether it’s supposed to disrupt the market or not, fintech solutions are now a must to everything that emerges in a financial startup department.

We can appreciate glorious bank offices, their noble atmosphere, and interpersonal connection with the staff, but the lines, schedule, and processing time will always be their burden. And what if someone wants to receive funding but the procedures are unbearably long, require tons of documents, and will still rely on a bank employee who can falsely judge on the clients’ solvency? This is where AI, machine learning, and blockchain will never fail and have more credibility when judging myriads of factors before lending money to the clients.

All these technologies are hardly a risk and are now viewed as a safe bet, given how many financial companies are shifting towards digitizing their services. So, I would like to focus on the best niches in the financial sector that could use the advantages of a solid fintech startup right now.

Lending/funding

Arguably the most challenging part when founding a business, it will always be in demand for a large part of the audience. Even Leonardo da Vinci struggled to receive funding and had to be very convincing to obtain it from the authorities in Florence. Despite lots of things that have changed since then, it’s still hard to gain funding, especially when the venture is small, and even a perfect credit history may not save the day.

But a fintech startup could be the saving grace — it can introduce new ways to evaluate creditworthiness by simply processing all the available data:

  • social network activity via connected accounts;
  • GPS activity tracking to analyze business trip frequency;
  • online shopping;
  • hardware usage (for example, expensive MacBook model usage can also be a factor).

In fact, all the available data can now form the credit rating and become an X-ray for clients’ solvency. Meanwhile, the human eye can only analyze some basic numbers and be distorted by outside factors.

Communication

It’s not a secret that financial consulting has been steadily shifting towards the online realm. Whether it’s bank technical support or a stock market representative, you will most likely chat with a person who is miles away from you. But what if that employee could be powered by technologies and only choose from the right options that would help his/her clients the most?

Photo by rawpixel on Unsplash

Modern AI is easily capable of making Bots that could analyze large amounts of data and form answers based on which data the users provide. For example, if a bank user is logged into the account and types a few words, the Bot could instantly reply (or suggest a reply for an online consultant) with the stock market or bitcoin currency rates, the next monthly payment amount, financial investment advice based on the recent changes, etc. Such neural networks are a self-learning system and can improve over time as more inquiries are received.

Exchanging

It’s fair to say that currency exchanges, wire transfers, and remittances aren’t new to the fintech area. But cryptocurrencies is what has brought it to the next level: generated by blockchain and operated within that system, it’s now a legitimate currency that is often viewed as a more attractive investment than the regular stock market institutes.

As mobile apps became the very core of the fintech itself, making crypto-payments via simple swipes was a logical step to integrate them as well. Whether you treat it as a wallet or debit card, blockchain will help the users verify their payment via dozens of devices to make the transaction a trusted one when operating cryptocurrencies.

Visa has seen the opportunity and is now partnering with applications that facilitate smooth cryptocurrency conversion and exchanges, making it attractive and secure for both developers and the end-users.

Insurtech

Thanks to being one of the financial sector cornerstones, insurance has also seen an influence of innovations. Increased connectivity, full automation, and a targeted group concept helped this industry quickly move forward and conquer the market. Although it is legislated differently based on each country, there are general issues that can be solved by insurtech deep learning:

  • AI helps companies evaluate countless health conditions for medical insurance;
  • It enables micro-event management, such as borrowing a friend’s car or planning a short trip;
  • Convenient online tracking via GPS or similar devices;
  • On-demand adjustments to the existing contracts or policies.

Risk mitigation is also its strength, as it can use the AI scoring methods to analyze which insurance policy fits clients the most. Social media history, medical and criminal reports, financial situations, and other factors can help AI form a much more valuable score than the brief human-eye analysis. Data-driven decisions and insights have proven themselves to be a prime option for both effectiveness and money-wise.

Even though Insurtech is now being widely implemented across Western countries, the Asia-Pacific region only represents 14% of such companies and is now growing so fast that it enables niches for the approaching the widest audience range.

Wealth Management and Accounting

Financial advice or data management is surely the trademark of the Insurtech itself.

Photo by rawpixel on Unsplash

Investors or those who operate sizeable sums of money can also get vast workflow improvements. There is no more need for financial advisors who come at a premium; instead, it’s safer to form an investment portfolio remotely. Smart contracts now replace regular ones, and platforms are now capable of making robo-advisors that will take care of redundant activities but still allow users to modify financial actions via a state-of-the-art dashboard interface.

Implementing blockchain will only increase the security level when operating large sums of money and would boost usage convenience by adding the cryptocurrency exchange.

Accounting can also take advantage by simply removing redundant paperwork and shifting all the data to the mobile apps. Thanks to AI, it is now possible to scan the papers and automatically transform them into easy-to-access digital bills, financial reports, and tax returns.

Despite the fact that the term “fintech” has been around since the 1950s, there was a drastic shift in its purpose: what started as a pursuit to get rid of the cash burden is now a chance to personalize and move the data to a digital realm. But what hasn’t changed is the leading role to push the services forward, and by doing so, to adopt the solvent clientbase that used to stick to banks but now prefers safe and organized software. And with the rise of blockchain, AI, and other technological solutions that greatly facilitate the fintech industry, you couldn’t find a more suitable and fruitful time to start a financial business.