7 Habits of Highly Successful Fintech Startups

It starts with a dream. Many startups begin with the idea that they will change the world. In the fintech world, you are only limited by imagination. And your engineer's coding skills, of course. Fintech startups are finding opportunities in the disintermediation of banks and emerging 2015 trends: crypto-currency technology, convergence in payments, focus on customer experience, user authentication security, and alternative models of lending. The hard truth, however, is that about 9 out of 10 startups fail. Launching and growing any business can be a challenging experience. If you have an idea for a fintech startup, the time is right. But before you leap, develop some core habits to execute your dream. In the fintech arena, there are some basic concepts that when applied, increase your likelihood for success. Here are the 7 keys that every fintech startup needs to open the door to success.

  1. Focus on the right target audience According to CB Insights, fintech startups targeting the millennial demographic have raised over $2.29B across 126 deals. People born between 1980 and 2000 are tech-savvy. They have been raised with technology. Millennials, also known as digital natives, tend to prefer 24/7 direct access to all their accounts. They are the largest generation to date (bigger than the population of baby boomers). Therefore, it may be wise to customize services catered to the millennial generation as well as specific geographic locations. For example, Avant currently issues loans to millennials in the US and UK. It’s one of the fastest growing online platforms for consumer loans and plans to expand internationally.
  2. Be truly innovative In order to stand out in the crowded fintech field, a startup must represent something different. It has to have an idea that will basically take fintech one step further or change the industry. The founder’s dreams often take the form of disruptive technology. For example, crowdfunding has changed the nature of the venture-capital process. It provides startups with new alternatives for raising operating funds. Nevertheless, in order to raise money the company must be different from all the others. Some of the first crowdfunding sites (think Kickstarter) altered the way we do business. It may soon be possible to crowdfund private loans for homes and automobiles. Crowdfunding isn't the only major shake up in fintech. As we increase the use of card-less transactions we eliminate the need for brick-and-mortar physical locations. PayPal is a good example of a game changing payments solution.  Startups have to be innovative, creative and disruptive, in order to change things.
  3. Keep it simple The customer experience is vital. Even though simplicity may hide complex coding, it's important. From here on out, many apps must be mobile. Too many features have a tendency to clutter and complicate design. Startups that use a minimalist approach in their digital products, services and apps will have an advantage over their competition. For example, Digit helps its customers save money without them having to take action. The app connects to a user's bank account, analyzes their spending habits and income. Then an algorithm automatically sets aside small amounts of savings ($1 to $150 on average). Developers that offer a simple, uncomplicated user experience have the right idea.
  4. Provide a quick and user-friendly experience Millennials have a "need for speed". They want their customer experience to be personalized, glitch free and faster. Credit Karma recently raised $175M on a valuation of $3.5B. With these funds, they plan on expanding their platform to offer loan consolidation and other services that include faster approvals. Credit Karma excels at keeping their solution friendly and fast. The user shouldn't have to read a manual or over-think in the digital world. Even the most user-friendly product or app may have powerful potential. Customers are best qualified to determine the strengths and weaknesses of the products and services they use. A great startup will use this feedback to build on their strengths and eliminate their weaknesses.
  5. Capitalize on trends Many successful startups are innovative, and stay ahead in the wave of current trends. Anticipating popular likes and understanding what direction the marketplace is moving...is a great habit to develop. The intersection of user experience and market trends is the "sweet spot" that every new company wants to hit. Wearable and mobile friendly technology is definitely on the rise. Virtual and Artificial Intelligence are also developing quickly. In the fintech sector, innovative startups like Personal Capital and MoneyBrilliant are capitalizing on these trends with financial apps available on Apple Watch. All successful fintech startups must ask the question “What’s next?” A great idea means very little if it takes too long in development. Startups need to stay ahead of the curve, in order to hit the market when there is a bigger demand.
  6. Solve a real problem All innovation is the result of an attempt to solve a problem. Startups that experience quick growth and true success, are bringing solutions to the marketplace. For example, ReadyForZero is solving a big problem in the US. Consumer debt is one of the biggest issues that Americans face. Reducing debt and protecting credit are common financial goals. ReadyForZero helps to better manage credit card, student loan, mortgage, auto loan or other personal debt automatically in an online environment. They are referred to as “the angel on your shoulder” in empowering consumers to pay down debt.
  7. Dream big In order for startups to grow, founders must dream big and build a stellar team to execute on those ideas. Who is to say that you cannot be valued at millions or even billions of dollars? Stripe is a perfect example of a company that thinks big. Founded back in 2009 by college students, payments startup Stripe is now valued at $1.75 billion. They work with Twitter, Alibaba and other amazing companies. Here at Yodlee® Interactive we work with a lot of disruptive fintech startups. There are some big advantages to harnessing the power of our Aggregation and Instant Account Verification APIs to build personalized digital experiences. Are you building an innovative financial app? Don't reinvent the wheel. Learn how to access rich financial data and quickly evaluate APIs with our test drive today!