We’re excited to bring back Transform 2022 in person on July 19 and virtually from July 20-28. Join leaders in AI and data for in-depth discussions and exciting networking opportunities. Register today!
As the leading sector for venture capital investments last year, the fintech market will continue to attract new entrants, fuel growth-stage companies and force incumbents to adapt. Many fintech companies are marching towards similar goals: to disrupt age-old financial practices.
Having invested in startups in my previous role and built a fintech business over the past decade, I’ve noticed a set of common mistakes and missteps that often happen with newcomers to the industry, but that are sometimes also present with mature companies. To avoid hampering business viability and growth, leaders should take note of these common pitfalls and mistakes during the early days and growth phase of a fintech business:
Mistake #1: Great UI doesn’t equal great service
Sustainable fintech companies offer much more than a digital interface. Product design and user experience are only one – albeit important – piece of the puzzle that makes up your company’s value proposition, but the overall customer experience depends on a much wider range of factors.
How fast can customers move around and access money? How predictable and stable are your services? How do you balance risk and compliance by introducing friction into your customer journey? Do customers have access to live support when they need it? Are customer data and money safe? How your business performs on these fronts has a much greater impact on customer satisfaction than your application’s front-end design.
This is a common pitfall as the last few years have focused on digital transformation and as technology leaders we are inclined to prioritize it. But in fintech, and digital banking in particular, the stakes are too high to overlook the critical infrastructure at the heart of your offering.
Remember: banks are services, not apps. So, to compete with incumbent banks and leading neobanks with these comprehensive risk, service, security, and compliance capabilities, fintechs need strong practices that should be in place from the early days of the business. a company – sooner than many founders think.
A reliable, secure and trustworthy banking experience trumps everything else and can make or break your business. After all, if fraudsters are hacking into your users’ accounts and stealing money, how much do they really care about how easy it is to switch between features?
Mistake #2: Settling for incremental improvement rather than disruption
Many fintechs unwittingly build with a rear view mirror. Instead of building your product or experience to be incrementally better than Chase’s or Wells Fargo’s, consider the opportunity you have to change the way people interact with and benefit from financial services.
Think of the iPhone: it replaced the standard phone keypad with a touchscreen and added multimedia capabilities to completely redefine what a phone is. Compare that to the Nokias and Blackberrys of the world that were incremental improvements to flip phones at the time, and it’s easy to see how Apple fared in this category redefinition.
Creating a solution that simplifies a task incrementally or integrating financial services into an existing application does not generate significant change for users or the market. Fintech needs companies that are redefining finance.
For example, Klarna and Affirm have redesigned and redefined point-of-sale financing with Buy Now and Pay Later (BNPL). BNPL introduces consumers to a whole new way of thinking about financing purchases (closed installment loans as opposed to open credit with traditional credit cards). BNPL also allows merchants to incentivize the purchase of specific products with interest-free financing (which the merchant can subsidize), which was not previously available.
This innovation is also welcome in other areas of finance. For example, banks are extremely conservative when it comes to offering lines of credit to small businesses, as monitoring can become an operational burden for the bank and therefore less attractive for smaller, less lucrative lines. When we built BlueVine’s line of credit offering, we restructured it to be essentially a series of term loans under a replenishment limit – combining the control and operational simplicity of a capital product. fixed with the availability of a variable capital product. This approach has allowed us to make lines of credit more accessible to small businesses.
It’s easy to anchor your product to what others are doing or pursue incremental innovation. Looking at the bands of neobanks popping up, many look alike. Disruptive innovation will always be a challenge, and the players who dare to completely redefine the $800 billion banking market are the ones who will succeed the same way Apple did with consumer technology. Those who limit themselves to simply beating the incumbents will either pivot or crumble.
Mistake #3: Building superfluous functionality instead of adding value
To bring value to your segment, think about your task and focus on doing it well. Although the number of your features is constantly growing, success is rarely measured by their quantity. Remember: quality beats quantity any day of the week.
Unfortunately, I’ve seen fintechs focus on feature speed or creating things that just look “cool” instead of thinking critically about their customers’ needs and how to add value to their daily life. Some fintechs offer a lot of third-party integrations for their users, but in reality, many of these external services are rarely used by their target segment. This type of facade is a poor allocation of resources that could be better spent improving and iterating on your core offering.
Another example: many consumers don’t want or need sophisticated financial visualization tools, such as cash flow forecasting. But we keep seeing these superfluous features in banking apps because, again, they look cool (or sound good to investors). But backend features, like fast money movement, should be prioritized instead.
That’s not to say I’m against adding features, if any. But in doing so, fintechs need to ask two important questions when deciding which features, third-party integrations, or products to add to an offering:
- How does incrementally adding to your platform create more value for your offering (compared to just being a supermarket)?
- Do your customers really care?
Features should be useful, thoughtful, and driven by customer needs or feedback. People will find a way to access the services they need, whether on your platform or elsewhere. There are needs in the market and so many things to do, so ask yourself if a given feature is your company’s job.
Mistake #4: Neglecting live support in favor of technology
Digital finance does not mean 100% self-service. Of course, the model should work and deliver efficiencies by being digitally native, but there are many areas – banking being one of them – where live support is vital. Overreliance on chatbots, voice assistants, or AI-powered self-service online resources is not only unwelcome to current users, but also hurts your business growth.
It comes down to understanding that your offering is more than a product – it’s great to have a resource center for common questions or troubleshooting, for example, but relying solely on that plus email support. mail is a major shortcoming. Robust customer support services require a variety of contact channels – email, phone, text, in-app chat support – and, most importantly, reliability Human Support. Never needed, still there should be what you optimize for and ultimately what customers appreciate.
Admittedly, setting up this initial help desk is an investment that many start-ups don’t consider in a timely manner. Building, training and operationalizing a support team of 100 people is no small feat and many fintechs unfortunately neglect it to the detriment of their users’ experience.
With so much on the horizon for fintechs of all types this year, consider some of these potential opportunities to change the way you prioritize certain areas of your business this year.
The market is becoming increasingly crowded, and underlying technology, capabilities, and robust products will be the factors that propel companies forward.
Eyal Lifshitz is CEO and co-founder of BlueVine.
Welcome to the VentureBeat community!
DataDecisionMakers is where experts, including data technicians, can share data insights and innovations.
If you want to learn more about cutting-edge insights and up-to-date information, best practices, and the future of data and data technology, join us at DataDecisionMakers.
You might even consider writing your own article!
Learn more about DataDecisionMakers