Is fintech failing? A practical opinion

As the startup craze is booming, more and more startups are emerging with new age and sometimes disruptive technologies. Integration of technology in the financial industry is what Fintechs are doing. Fintech startups are not only limited to the banking and financial industry but also include insurance and stock broking startups. However, not all Fintech startups can survive and thrive.

Therefore, it is essential to understand the entire ecosystem in which Fintechs operate. Whether you want to learn about banking, insurance, stock broking, or any other Fintech industry, you can obtain deep insights through a Fintech Certification program. It allows you to mitigate risks associated with Fintechs and reduce the chances of failure. However, a pertinent question arises here – are Fintechs failing? Let’s see!

How can Fintech startups fail?

The failure rate of startups is astonishing. Per the Wall Street Journal, 3 out of 4 startups fail; that’s a whopping 75% of the total startups. Therefore, it is essential to understand the risks faced by Fintech startups. It can include:

• Inadequate market research: Understanding the market before getting on the ground is crucial. Thorough market research will inform you about the existing competitors, customer requirements, current and emerging technologies, etc. Underestimating competitors and their offerings can wipe out the existence of your Fintech. Further, there is a need to provide unique offerings to enter and dominate the market.

• Changing financial landscape: The economic landscape is constantly evolving. For instance, with the advent of Web 3.0 technology, Fintechs are in search of a way to integrate blockchain technology with the existing financial landscape. Moreover, new products are launched in the market, like crypto lending, buy now pay later, etc., to woo customers. However, it also comes with a drawback. It doesn’t take much time for existing technology to become obsolete; therefore, Fintechs must adapt quickly to the changing financial landscape to remain relevant and competitive. The more flexibility a fintech has, the more resilient it will be to the changing landscape and the chance to succeed will be greater.

• Cost of acquisition: In today’s startup era, customer acquisition costs are Most startups incur massive cash burns to acquire customers by giving deep discounts, freebies, rewards, etc. This leads to cut-throat competition among the startups, and in no time, you will find a new competitor with differentiated offerings chewing up yourcustomer base. Startups raise massive funding to finance their customer cost of acquisition. However, it is essential to understand that, ultimately, businesses work for profits, and therefore, it is vital to convert the startup to profitability.

• Regulations and compliances:The financial sector has its own regulations and resultant compliance requirements. For instance, you must comply with all relevant SEBI laws and regulations for stock broking services in India. In the case of banking or payment services, you need to ensure adherence to RBI regulations and requirements. These are in place to protect consumer interest and avoid irregularities. Therefore, a Fintech missing out on such regulatory compliances can attract heavy penalties.

• Information technology risks:The fintech industry involves technology in finance. Therefore, it is always susceptible to information technology risks. This can include cyber attacks, data loss, theft, server issues, etc. If it happens frequently, it can affect the customer experience, leading to the loss of customers. Therefore, fintechs must ensure good IT controls and security systems to mitigate those risks.

How to avoid failures?

To reduce the chances of failure, you must ensure that your Fintech mitigates the above risks. In addition, as the competition is enormous, you must add value to your customers. This can be done by providing differentiating offerings and services to your customers. However, before starting with your Fintech, it is important to understand the Fintech industry, how it operates, the market segments in which Fintech operates, etc. This will increase the odds of your success.

Further, apart from the above risks, there are certain prominent reasons that lead to the failure of FinTechs. These include inadequate funding, inability to comply with the laws of the land, low-cost metrics and macroeconomic cycles and government policies. Mitigating these risks is important to ensure the success of your FinTech.

How to understand the Fintech industry?

Understanding the Fintech industry is not difficult. Further, in today's world, where we have access to courses for almost everything, you don't need to start a FinTech to understand how the FinTech industry operates. You can enrol in a financial technology course to gain insights into the Fintech ecosystem. Imarticus Learnings has an exclusive Fintech Certification Program that provides detailed learning about how Fintechs operate and case studies to understand real-life practical examples. If you are searching for the best Fintech courses in India, it’s time to enrol in Imarticus Learnings. You can also contact us through chat support.