From changing how we pay for products to reaching unbanked and underserved communities, technology has changed the game in many parts of the world. The financial services industry in particular is ripe for disruption, and many entrepreneurs are turning bright ideas into innovative products and building businesses that are transforming the sector.
But having an innovative idea and setting up the business is only the beginning of your long FinTech journey. Along the way, you’ll be given advice, warnings, and even opportunities that may look beneficial but will ultimately hold you back.
We’ve outlined seven startup “myths” that we think entrepreneurs should be mindful of when embarking on a FinTech journey, with the aim of steering you in the right direction:
Myth #1: All you need is a game-changing idea
The FinTech space is rife with opportunities, what with its potential to change how millions of lives receive, handle, and use their money. You may have an idea—or several—that you foresee changing millions of lives for the better or completely disrupting the industry.
But a great idea can only take you so far. Building a startup around that idea involves looking for the best fits for your team, setting long-term goals for your company’s growth, and finding the right advisors and partners to support your business, to name a few. It’s great to have a game-changing idea in the works, but it’s important to remember that it’s only the first step.
Myth #2: Say yes to the first investor you meet
If you’re one of the many startups that experience issues with funding, there’s a good chance that you’ll take any investment opportunity you’ll get. So, when you get your first offer from an interested investor or advisor, you might be compelled to automatically say ‘yes’.
But a good entrepreneur knows to assess every investor beyond the funds they can provide, as the terms of the deal can make or break your company. What insights can you glean from this advisor? How will the startup benefit from the investor’s network and resources? What’s the investor asking for in return? It’s understandable that you’ll need all the help you can get in the growth of your FinTech startup but getting the wrong kind of help may be worse than getting no help at all.
Myth #3: You have to disrupt the incumbents
It’s been mentioned many times, particularly within the FinTech space, that startups are out to disrupt or even replace the big financial institutions. While it’s true that a bulk of FinTechs are disrupting traditional companies, that doesn’t mean they’re working against them.
In fact, an increasing number of FinTech startups around the world are collaborating and partnering with these established institutions to deliver win-win propositions. While startups benefit from improved credibility by working with a big-name partner, banks and other financial institutions also gain by working with nimble startups which can offer fresh solutions to long-standing issues. If your goal is to replace the bulge bracket with your startup, you may find your business meeting more dead ends than opportunities.
Myth #4: Regulation stifles innovation
With money being one of the most important assets of a nation, it’s no surprise that there are various rules and regulations in place to ensure its security. As these rules were mostly enacted with traditional businesses and institutions in mind, many new startups are afraid that regulators won’t be open-minded to the changes and disruptions that they propose, and that the introduction of a single detrimental regulation could stifle the growth trajectory of their business.
But much like how startups are collaborating with traditional banks instead of going against them, many companies are also working with lawmakers in their respective countries and meeting them halfway. Instead of fearing the regulators, you may find broader opportunities by having a dialogue with them or even working with them to find solutions.
Myth #5: Your business idea needs to focus on payments or lending
Sifting through many compiled lists of FinTechs, you may notice that the bulk of these players focus on one of two types of services: payments and lending. From mobile wallets to microloans, many startups are finding success in digitizing how individuals spend and borrow money.
But the FinTech industry goes beyond providing payments and lending services. There are startups which focuses on insurance, investments, crowdfunding, and various other financial services. Don’t feel pressured to stick to tried and tested business models for your startup, as market needs extend beyond payments and lending.
Myth #6: You need to use the latest and hottest technology
With new technologies driving so much innovation, many startups leverage the latest cutting-edge tech to disrupt established processes. From AI to blockchain, these innovations all aim to improve the foundations of financial services and make them more accessible and efficient.
However, centering your businesses on one of these technologies isn’t always a shortcut to success. The most effective businesses that use these innovations have mastered these technologies and created a unique solution out of them. In the same way, there are many startups that have become successful even without these innovations in their business models.
Myth #7: FinTech innovation can only be successful in developed markets
At its core, FinTech aims to improve the distribution of financial services through technology, which may make you think that these businesses can only work out in communities that are digitally-savvy. But as seen in many cases around the world, new FinTech ecosystems have popped up in several emerging markets. There are opportunities to be captured everywhere.
While building and scaling a startup isn’t easy, busting the myths from the facts can go a long way in supporting a company’s growth. It’s good to be receptive to different kinds of feedback and advice along the way, but it’s more important to know what advice is going to be the best fit your business.
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