Turning a FinTech startup into a success story is no easy task, no matter how disruptive or innovative. Here are 5 mistakes FinTech startups often make that lead to failure:
- Ignoring legal aspects – the financial services industry is heavily-regulated, and certain sectors are ultra-specialized when it comes to the legal world. Be sure to know all relevant legislation and comply.
- Ignoring the concept of money – money can be a weird concept. Understanding the psychology that goes with money, credit, savings, payments and investments at both the retail and institutional levels is a huge advantage for any FinTech startup, especially when it comes to making decisions about where to spend available funds and how to grow a customer base.
- Choosing the wrong strategic investor – the financial services industry is a very unique industry where experience really matters. It is important that investors have both experience and knowledge of the space and its opportunities and challenges.
- Ignoring customer adoption challenges – perhaps the biggest challenge for any FinTech startup is getting people to become users. Many FinTech startups fail because they don’t understand how consumers think and act. Consumers are largely creatures of habit and slow to change. This needs to be kept in mind.
- Being trapped in a “financial institutions are our competitors” mentality – FinTech startups aim to fix issues in the financial industry and often have an “us against them” mentality when it comes to financial institutions. But financial institutions can offer FinTechs knowledge and stability as well as numerous partnership opportunities to grow and slowly revolutionize the financial services industry.