3 Things to Avoid When Building a FinTech Business
After a brief slowdown, the market has rebounded and FinTech startups are now raring to make their mark. What does this mean? You need to make sure your startup gets noticed. The best way to ensure you get the needed attention is to have an excellent marketing campaign ready to go. There are many ways you could choose to go to launch your product, just make sure you avoid some key errors.
Don’t Be Afraid of Failure…But Make Your Mistakes Early
As a startup, you are bound to make mistakes. That being said, do not let the fear of making these errors dissuade you from continuing to build your brand. The important thing to do is to keep an eye out for the mistakes so they can be fixed quickly. The sooner a problem is amended the less it will affect your (lean) budget or your production process and the less of an impact it will have on the market at large.
Don’t Make Change Without Proper Research
Often, when a product stalls or doesn’t have the desired impact, human nature says the best thing to do is “fix it.” However, this is not always the best call and can be very damaging—especially if a product is new in the market and hasn’t had a chance to find an audience.
If you need probably the most-known example of failed change: Remember New Coke (or Coke II)? What was supposed to be a game-changing way to bring customers back from Pepsi only angered loyal customers and the concept was eventually scrapped…but only after a very expensive marketing campaign had been rolled out. Now widely known as one of the biggest marketing fails, New Coke shows the dangers of trying to solve a problem by fixing an unbroken product. Look at the potential solutions before rushing into an expensive overhaul and full-blown marketing campaign.
Don’t Send Out the Wrong Message
First, your company and product need to have a clear sense of unity across the board. Make sure you have an integrated marketing strategy that will create consistency and familiarity, instead of sending out opposing concepts that confuse and rattle your potential consumers. By focusing your campaign in a defined area you will ensure your product will be seen as stable and a quality buy.
Second, make sure that message is the correct one for your market. Choose the wrong message and your competition will overtake you. This is what happened to Wesabe: They had a good product, but Mint had a better understanding of their customers. In that battle, Mint won.
The startup market can be a terrifying place, especially when you consider that 90% of startups fail. If you want to be a success story, you need a growth mindset and you need to know about the potential hurdles and mistakes ahead of time so you can work out the solutions and get your product in front of an interested consumer base. Make sure your marketing team is armed and ready for action as they are your best partner when it comes to conquering the business world.
For more information, download our free ebook at http://leadervest.com/e-books/
The Top 6 Market Must-Haves For Startup Success
Here is a (little-known) fact that is vital for all startups to understand: You can have the best product in the world, a true game-changer that could help millions, but if you don’t know how to market your product it’s going to get lost in the crowd. (That is why, in the ‘80s and ‘90s, you had a collection of VHS tapes and a VCR instead of the superior Betamax system.)
As technology changes, so does our way of seeing the world. The marketing plan of 50 years ago is radically different from today’s marketing plans. (After all, the marketing plan of 15 years ago is very different.) This means you can’t just rely on the tried-and-true methods of the past if you want your startup to survive and grow in today’s busy marketplace. That being said, there are some facts that remain true regardless of how the marketplace shifts.
Timing Is Everything
If you want to succeed, you have to strike when the market is hot. Launch at the wrong time and your product will be ignored by disinterested consumers. As the interest in FinTech is steadily growing, now is the ideal time to show the market what you can offer.
Understand the Need in the Market
The most successful products are game-changers, items or services people have been yearning for to make life easier. If you want to make an impact on consumers’ buying habits, you have to relate your new product to one of their pressing needs. This will require research (potentially a lot of research) and you will have to obtain direct feedback from clients—enough feedback to uncover what the greatest common issues are. Use your marketing to prove that your unique product will improve their lives and you will find you have created a loyal and happy customer.
Define Your Purpose
Once you understand the needs that are in the market, start to analyze how your product can make a meaningful difference in the world and how it can make life better for your clients and society at large. Corporate social responsibility is a major part of the modern business world and a minor donation at Christmas is not enough to cultivate a good image in the marketplace. Socially-conscious companies now have their purpose aligned with their strategies, proving at every step of the way that they believe what they are producing is helping their clients and the world at large. By solidifying this purpose you will draw like-minded clients and partners towards you and help you build your base.
Connect With Your Audience
Do you know your target market? Do you know the best way to reach them? This is vital information to uncover before you start any promotional planning.
There is no one-size-fits-all solution when it comes to marketing—and this is especially true today. The methods needed to reach teenage girls are radically different from those needed to reach the senior generation. (Chances are high no seniors ever downloaded iAllowance.) If you put your marketing weight in the wrong area with the wrong marketing technique, you damage your brand reputation and lose money in a failed campaign. That being said, when you find the right voice and the right spot, your customers will come running.
Leverage Technology
One of the primary reasons today’s marketing plans differ so radically from past plans is because of the advances made in technology and the changes in human habits that came with it. If you don’t know the new technology and you don’t know how to properly reach your target market, your promotions will not have the impact needed to keep your company above ground. For example, according to Demand Metric, content marketing can generate three times the leads of traditional outbound marketing while being 62% less expensive. If your company is devoting its attention and marketing budget to a series of print and TV commercials, you could find your efforts won’t see the needed return.
Show Innovative Leadership
If you want your startup to thrive, you need to ensure your team is being properly led. And if you want to succeed in our ever-changing diverse world, you need to be ready to meet the different needs and work habits you will encounter in the marketplace. Innovative leadership is what will lead your team to tap into their creative prowess and create the perfect marketing plan for the next big startup—yours.
After putting all the effort into the creation and launch of a new product, no company wants its efforts undone by a substandard marketing plan. And with FinTech still being an unfamiliar player in the game, your marketing efforts need to be even stronger to impart your value to customers. Ensure your strategy is strong and your message is clear. This, when combined with a growth mindset, it the best way to ensure your startup will thrive.
Why Big Data Is a Big Deal in the Insurance World
It can very easily be said that both big data and FinTech are game changers. Using modern technology, they are changing how we interact with the world. And when you combine them, you can create an explosion of innovation and potential.
Nowhere is this clearer than in the current insurance market. FinTech began linking itself with insurance rather quickly and there are numerous startups that illustrate how well FinTech and insurance collaborate. Sureify Labs, for example, uses the new technology to solve the problems the modern insurance companies are facing and RenewBuy gives motorists an easy way to research and purchase insurance.
Then, with the addition of big data, the entire process is taken to another level. Mass amount of information can now be brought in at record speeds. When FinTech and big data are combined, these juggernauts change how people are brought in and analyzed by companies, as well as change how easy it is to access accounts. Modern technology is speeding up and simplifying the various processes, which is fantastic news for many people.
However, there is also a very real dark side. Big data is the proverbial apple, and once that knowledge is consumed the results could be devastating. Imagine a system that can easily pinpoint who (for profit/risk reasons) may be considered insurance risks and put that power in the hands of people controlling the decision making process of insurance companies. If insurance companies have the ability to charge based on calculated risk, a percentage of the population is going to find themselves facing sky-high rates or possibly being priced out entirely. If they are not given exorbitant rates, they may find themselves outright refused coverage. So the question is: Do we allow insurers to set up this system? Do we re-create insurance so people are charged based on big data risk factors, reducing costs for some and bankrupting others? The decision made in this area has the potential to dramatically change society.
There is no denying that big data is an amazing technological breakthrough and FinTech is set to turn the financial world on its head, but we must be very careful when it comes to dealing with the negative uses for these innovations. Yes, they are making today’s lives easier, but we have to be careful that it’s not a devil’s bargain.
How to Start Your Big Data Journey
Big data is vital in today’s technologically-savvy marketplace. Today’s companies have embraced this amazing technology and are using it to improve their businesses. In fact, the projection is that by 2020 companies will be spending around $34 billion on big data hardware, software and services. But is building an advanced analytics capability worth the investment?
According to a Bain & Company study, the best-performing companies are the ones that have advanced analytics capabilities. In fact, these companies are outperforming their competitors by a wide margin and are twice as likely to be in the top financial quartile within their industry.
As Dillon Burroughs once said, “Sitting on the sidelines in our interconnected world is not a sufficient response.” If you want to compete and you want to make a difference, you need to know how to properly harness big data.
Are you ready to get in the game? Here’s what you need.
Find a purpose
Clearly lay out what your purpose or ambition is in terms of your big data usage. Are you going to use it improve an internal process or transform a business model? Kabbage, for example, used big data to do just this. They created their own financial system to offer small business loans and aligned themselves with notable businesses to provide perks as well as loans, meaning customers can obtain the needed funds and then access exclusive deals to further help their startup grow.
Get started
First, determine where the company stands in terms of analytics. Compare yourself to your main competitors and determine from that the areas in which you can (and need to) improve your position in the market.
By experimenting, you will learn how advanced analytics will help your business. As you become more skilled at using big data, you will better learn how to use the system and your company will rise in the rankings.
Define your analytics capabilities
Your system will need both a horizontal analytics capability and advanced analytics capabilities. First, work on developing your horizontal analytics capability and define the owners and sponsors for the initiative. This action will ensure that key decisions will include the proper data, targets will be created for financial and operational improvement and the casual impact of big data will be registered.
You then need to create an organizational home for the advanced analytics capabilities. Your specific technique will depend on your company, but the five typical models are: Centralized, centre of excellence, consulting, decentralized and functional.
Once the system is set up and running, you will clearly see why the top companies are all using advanced analytics capabilities as problems will be easier to see and solutions easier to come by. Thanks to FinTech and big data, we are in a new golden age when it comes to business technology. Get ready, because now is the time for your business to reach its full potential.
How Will Regulation Affect FinTech?
Once upon a time, a seed was planted. The idea behind this seed was to challenge the antiquated banking system and introduce technology that would vastly improve the process. As FinTech continues to grow, there are still issues that are preventing it from fully flourishing.
One of the major issues facing FinTech is regulation. The pre-existing regulatory framework (currently used by the big banks) can create headaches for startups, as this framework is outdated and can hinder the creative development that led to many of FinTech’s breakthroughs. However, thanks to the increasing prominence and power of the FinTech movement, government agencies are working towards changing the framework to allow FinTech to reach its full potential.
Europe and the UK, for example, have chosen to take an active approach to regulation. In the UK, the Financial Conduct Authority (FCA) has introduced a new range of considerations to include FinTech and offers an application process that is simple enough to not get in the way of the creative process involved in bringing a new FinTech breakthrough to market.
Canada, which has a highly concentrated banking system, uses the Office of the Superintendent of Financial Institutions (OSFI) to regulate its big banks, but this system is not mandated to regulate new FinTech companies. However, the Government of Canada’s Competition Bureau is currently undertaking a study to explore and advise on the regulation of the FinTech industry.
In the United States, many startups are wary of the concept of regulation and, according to PwC, 86 percent of financial services CEOs are unsure about the coming regulation and what the impact of heavy regulation would be on their business. That being said, various government agencies (including the Treasury Department, the Consumer Financial Protection Bureau and the Federal Trade Commission) are currently exploring the best process to introduce regulation.
FinTech was meant to be a game-changer, a better way of thinking that would bring in a new era of finance. That being said, expecting that this new system was going to be allowed to play by its own rules was naïve and in order to fully succeed FinTech is going to have to embrace the idea of regulation. Luckily, the major government agencies are getting ready to work with the field in order to ensure that FinTech will continue to be the better way.
See How CRM2 Will Affect You
Depending on where you sit, CRM2 can seem terrifying. Because of this regulation change, the books are being opened and advisors are required to go into much greater detail when it comes to their fees, giving investors more information to sort and analyze in terms of the services being rendered. Whether or not you consider the move a wise one, there are five questions that need to be addressed.
Do people need this new transparency system?
According to a survey done by the Canadian Securities Administrators (CSA), two-thirds of investors did not know about the compensation advisors receive from mutual fund companies. Although an argument can be made for the positive aspects of ignorance, investors have a right to know where their money is going. Full disclosure is a necessary part of the business world and excluding the investment field from this concept is not right.
How will this newly gained knowledge affect them?
That being said, the sudden realization of how the money flows has the potential to cause investors to abandon the field of mutual funds. In order to prevent (or limit) this mass migration advisors need to be ready to explain the compensation situation to their clients.
How should fees be explained?
Advisors should always make sure investors know the full range of services they are getting when the advisor is brought on board. Introduce an itemized list of services that clearly lays out where the money is going and the value that comes from an advisor’s services. The hostility that can come from the new knowledge of how the money is divided is lessened when the details are known up front and the full value of those fees is laid out for the investor.
What does this mean for mutual funds?
One likely option in the post-CRM2 investment world is an increase in ETFs, as the new knowledge regarding the fee system will cause investors to stay away from mutual funds. This is good news for businesses that specialize in ETFs and great news for innovative companies that specialize in ETFs.
WisdomTree is one such company that will see an increase in investor interest. One of the largest ETF providers, Wisdomtree has in fact used smart engineering to recreate the process of investing. Their unique “smart beta” products will be of great interest to investors who now know where their money is actually going.
What does CRM2 mean for robo advisors?
Robo advisors are the most likely winners in the new CRM2 market. With low fees already in place the reveal of their added costs won’t be as startling to current users while disgruntled investors choosing to explore their options are likely to be swayed over by the lower costs. Add in the additional benefits of the robo advisor system (increased access, easy-to-use platform systems) and the robo advisor system is going to come across as the best option for the financially-savvy consumer. Startups like Wealthsimple and Nest Wealth can use the new market rules to stress why their system is best for the modern investor.
CRM2 is bringing the investment market into its next stage. If handled properly, this evolution of the market will result in more content investors who feel fully knowledgeable about their investments. This new stage is also great news for FinTech, as the increased disclosure element of the new regulatory system shows that FinTech is the best option for the smart investor.
Living Paycheck to Paycheck? FinTech Can Help
It’s a depressing and common notion that most Americans are one paycheck (or emergency) away from living on the street. Not surprisingly, the 1% don’t seem overly concerned with the plight of the common worker and continue to enforce a status quo that benefits those on top while forcing the common man to subsist on a payment schedule chosen by the elite.
What, then, do these everyday folk do when they find they are unable to manage with infrequent payment schedules?
FinTech has the answer. Active Hours is a startup that provides pay for services rendered when people need it, instead of when the system decrees it’s time for them to get paid. By simply sending an image of their electronic timesheet, clients can get funds deposited into their bank accounts. Then, when real payday comes, Active Hours is reimbursed from the customer’s account.
The company was started in 2007 by Ram Palaniappan, a business owner who realized his employees were being forced to pay late fees on bills because they had to wait for a set time to collect money they had already earned. Recognizing the folly behind forcing people to wait to gain access to money when they have already done the work for it, he set up a system that gave them the opportunity to access to the funds when they needed it. Then, rather than charge a set fee for the service, Active Hours allows customers to pay what they think the service is worth.
Although Active Hours was originally created for Palaniappan’s own business, the company has since grown and is offering its services nationwide. This is fantastic news for the millions of Americans saddled debt because their current payment scheme means they have to put basic needs on strained credit cards and end up in situations where—thanks to crushing interest rates and punitive late fees—they will likely never see the end of the debt tunnel.
The modern work world is often known as the rat race and, for many people, the current payment system is like running the race from the exercise wheel. Although they are constantly working, because of the combination of payment times and late fees, there is no chance of them ever getting ahead. Big Banking, run by the elite, has no desire to look at this issue. Were it left up to them, the system would never change. Luckily, however, we have FinTech and this new system is turning the banking status quo on its head.
How FinTech Is Helping the Homeless
Poverty and homelessness, sadly, seems to be a problem we have yet to solve. This is not because of a lack of compassion, however. People want to help, but sometimes they don’t know how and sometimes they fear their help is going to cause more harm than good.
There is another issue slowly trickling in: As coins become used less frequently, the spare change that used to be handed over as a small token of assistance no longer exists. When this cashless society fully sets in, how will those who wish to offer assistance, however minor it may seem, go about it?
Several startups saw this issue coming and have set out to find a solution.
Spare is an app that is seeking to get people to donate in the easiest way possible. When New Yorkers pay the bill at restaurants that have partnered with Spare, they can round up their bill and send that extra change to Spare, which uses the funds to support New York food banks. Just 99¢ (the maximum donation) can help provide four meals.
Plus, to offset one of the usual biases against charity (“I have no proof this money is actually going to help those in need,” etc.) the Spare app has a feature that allows you to track how many meals have been provided. And as an added incentive, the app offers rewards, ranging from a complimentary cocktail to $15 off your meal, so participants can know they have helped people in their community who are need of food and get something back from their efforts, drawing in people who might be hesitant to part with their change.
BlockCrushr Labs is another startup aiming to find a solution. Although their system is still in its early stages, it will one day allow people to donate money to digital food wallets, which homeless people can then use in participating retailers to buy food for themselves. The concept behind this technology is it makes giving easy and also gives the homeless a sense of dignity and stability in their lives. And before you question how these wallets would get used by those in need, note that a surprising number of homeless people have access to smartphones (often donated by various charities and corporations that know how important a lifeline that access is), which would give them the ability to check their balances.
As we move more and more towards a cashless society, it is important to not forget those who may not have access to the technological advances and could suffer from the changes these advances bring. Luckily, FinTech has foreseen the coming storm and is working to find solutions that will result in a better financial world for everyone.
How FinTech Has Improved the Money Transfer Process
North America is home to millions of migrant workers living and working for American and Canadian economies while also sending money home to support their families. These people work hard at manual labor jobs (often heavily contributing to the harvesting and distribution of our food supply) and deserve the ability to easily send a portion of their earnings to family members living in other countries.
Until recently, these workers had to rely on remittance firms to transfer the money, paying sizeable fees to send funds to loved ones. Thanks to FinTech and its innovations, however, the process is now much easier and cheaper.
Xoom was one of the earliest entries in the market, giving customers an easy way to send money or pay bills. Now owned by PayPal (which bought the company in 2015 for $890 million), users can send money to over 50 countries for a fraction of what remittance firms charge. They can also easily pay international bills, both helping to ease the moving transition and giving people another way to assist overseas family members. The system is set up so people can sign up for an account and start sending money within minutes (and even track the transfers), making the act of sending money simple and stress free.
Another new option is Remitly, which lays out its vision as “[empowering] people to strengthen relationships across borders by being the world’s most customer-focused payments company.” The company strives to make the money transfers as painless as possible, using technology to eliminate many of the steps formerly involved in transfers (forms, codes, agent interaction, etc.). Well aware of the issues immigrants face when trying to access financial services, the company wants to help change the system and give these immigrants access to the funds they need to survive and thrive in their new country as well as support their families. Considering the fact that they passed $1 billion in annual transfers, they have tapped into a needed and lucrative market.
The increasingly shifting global economy means more and more people are going to immigrate in order to meet their financial needs. As moving entire extended families is near impossible and incredibly expensive, people will be left behind. Giving these immigrants easy and affordable access to money transfer services is the best way to ensure that everyone involved remains healthy and free of stress while the workers contribute to the growing global economy.