How to Prevent Your Fintech Startup From Failing: Key Strategies To Follow in 2024

Why Do Fintech Startups Fail to Sustain?

To begin with, the failure rate of fintech startups for venture capital-backed businesses is 75%. The majority of the fintech startups fail after they secure funding from VCs due to their negligence towards compliance. Let’s explore some more reasons: 

• Inappropriate Market Fit

Fintech app development can be a costly affair, and many startups fail to allocate resources wisely. Understanding your target audience and tailoring your solutions to their specific needs is crucial. A misalignment between the product and the market can lead to irrelevance and eventual failure.

Startups must conduct thorough market research, analyze consumer behavior, and iterate their offerings based on feedback to ensure a harmonious fit.  Fintech companies should keep customers' experience as their top priority. Because It’s easy to lose track of what consumers are searching for when adapting the new technology.

• Finance Timing

The heartbeat of any startup lies in its financial rhythm. Thinking that funding is easy can be a silent killer. Sometimes it takes 3 months to a year until the investor finally provides you with the money. Decisions made out of sync with market dynamics may result in the misallocation of resources and financial instability.

Fintech entrepreneurs must play it safe by foreseeing potential delays in funding and establishing a financial strategy that accommodates these uncertainties. 

• Incompetent Partnerships

Choosing the right partners is pivotal in the fintech landscape. From fintech app developers to strategic collaborators, the wrong partnerships can derail your startup. It is important to collaborate with a reputable fintech app development company that brings technical expertise to the table. Establishing robust partnerships ensures a solid foundation for your fintech venture, from development to market launch.

To get success, hire fintech app developers who are proficient and can help you build successful fintech apps like Mint or Simplifi. 

• Underestimating Federal Laws 

Navigating the rules of federal regulations that govern the financial sector is a non-negotiable aspect. Underestimating or overlooking federal laws can expose your startup to legal challenges, hindering growth and potentially leading to shutdown.

Engage legal experts well-versed in financial regulations to ensure compliance from the outset. Just to mention, regulations not only apply to the operational side but also the development end. Fintech app developers must follow legal practices to achieve the business goal of the finance app. It encompasses adhering to local, and international privacy as well as data laws. 

There are 3 laws you should be very careful about before opting for fintech app development:

• Anti-Money Laundering: This aims to prevent criminals from using legitimate financial systems to clean illegally obtained funds. And non-compliance can result in financial penalties and potential criminal charges.
• KYC: An app’s Know Your Customer guidelines ensure it gathers and verifies sufficient information about its customers to understand their identity, source of funds, and intended use of the app.
• Payments Service Directive: Also known as PSD2, is a significant piece of European Union legislation that regulates payment services within the single euro payments area (SEPA).

• Ignoring Economic Cycle 

At last, before you shake hands with a fintech software development company and step into the development process, you need to consider studying the target country’s economic cycle.

The reason behind this is you don’t want to be working against the national economic policy of the country. Business cycles must be for all digitized solutions for your startups to flourish in the long run. 

Recognizing these challenges is the first step toward fortifying your fintech startup against failure.  You can go through our comprehensive guide on fintech app development and chart a course that leads to sustainable growth. Going ahead, let's find out the reason behind investing in fintech in 2024. 

Why is 2024 the Ideal Time to Invest in Fintech App Development?

The global fintech marketplace continues its exponential growth. As of 2024, there are 26,300 fintech startups globally and the success rate of these startups is 25%. There are several factors contribute to the opportune moment for fintech investment:

• Financial inclusion initiatives

Today, millions of individuals around the globe still are unbanked, facing barriers like geographical constraints or high fees. This is where fintech application development emerges as a powerful tool for driving financial inclusion initiatives.

Mobile phones have become ubiquitous, especially in developing regions, serving as a gateway to a world of financial possibilities. Fintech apps can leverage this widespread tech accessibility to offer essential services like microloans, mobile payments, and BNPL services. 

Beyond just providing basic services, fintech mobile app development can also address specific challenges. For example, apps can offer budgeting tools, and personalized financial advice, promoting responsible financial decisions and long-term financial well-being. 

• Increased Digital Adoption

The pandemic accelerated the shift towards digital solutions, making fintech more relevant than ever.  In 2023, China and India have the highest fintech rate adoption. These two countries have recorded an 87% adoption rate among the public. Meanwhile, the average fintech adoption rate globally was 64% in 2023. Users are embracing digital transactions, online banking, and contactless payments, creating a ripe environment for fintech startups to thrive.

By investing in finance mobile app development, startups can tap into a growing pool of digitally savvy customers who demand convenient and user-friendly financial tools. 

• Wealth of APIs

Gone are the days of building everything from scratch - today, a vibrant ecosystem of fintech APIs has blossomed, offering pre-built, reusable code blocks that allow fintech app developers to create powerful and innovative financial apps with unprecedented speed and agility.

This wealth of APIs is a goldmine for investors looking to enter the market. You can simply plug into APIs that handle identity verification, payment processing, or even fraud detection. This significantly reduces development time and cost, allowing you to bring your fintech app to market faster and with fewer resources.

• Regulatory Support

While some might picture regulatory frameworks as restrictive hurdles, in the case of fintech app development, they can act as supportive springboards for innovative solutions. The actual interest comes from looking at the capabilities of cybersecurity in fintech that enhances users’ trust. Governments and financial authorities are increasingly recognizing the potential of fintech and actively building supportive programs.

This financial backing can be particularly critical for early-stage startups, boosting the ability to secure funding and scale your operations.

• Dedicated Workforce

Digitization in the finance industry is not just about technology and regulations; it's about people. And in this game, a pumped-up, passionate workforce is the secret weapon powering the next wave of financial innovation.

A dedicated fintech workforce believes in the transformative power of technology to democratize finance. This sense of purpose translates into dedicated employees who go the extra mile to build user-centric solutions. So, invest in professional fintech app developers, and watch your app climb to the top of the financial revolution.

How to Make Your Fintech Startup a Success?

Building a successful fintech startup requires a thorough understanding of the marketplace. But with the right approach, you can turn your innovative ideas into reality and make a significant impact. Here are some key ingredients for fintech startup success:

• Building Trust

In an industry where security breaches and data theft are significant concerns, establishing credibility and transparency is essential.

Firstly, make sure to invest in robust security measures to protect your users' information. Implementing advanced encryption technologies and conducting regular security audits can go a long way in reassuring your customers that their data is safe with you.

Secondly, compliance with regulatory standards is vital. Staying up to date with the latest regulations and adhering to industry best practices will not only help you avoid legal troubles but also demonstrate your commitment to operating with integrity.

• Embrace Emerging Technology 

In the fintech landscape, the only constant is change. To stay ahead of the competition, embracing emerging technologies is necessary for growth.

One of the most promising technologies driving fintech innovation is artificial intelligence (AI). Implementing Al in fintech can automate repetitive tasks, improve fraud detection, and enhance customer experience. Blockchain technology is another area to explore. By integrating blockchain into your fintech startup, you can transform traditional financial processes, such as cross-border payments and smart contracts.

• Connect with Customers

Customer-centricity should be at the core of your fintech startup. Building strong relationships with your customers enhances trust and loyalty, ultimately driving your business forward.

Utilize data analytics to gain insights into your customers' behaviors and preferences. By understanding their needs better, you can offer services like mobile banking, instant payment transfers, digital wallets, and online lending to meet their expectations. Regularly gathering customer feedback through surveys and reviews will also provide valuable insights for improving your services.

• Choosing the Right Technology Partner

Partnering with the right fintech app development company can be game-changing for the success of your fintech startup. Look for a partner who has a proven track record in the fintech industry and can offer solutions that align with your long-term goals. The right fintech app developers will provide the necessary technical expertise to overcome unique challenges.

Additionally, make sure your fintech app development partner offers a secure and scalable infrastructure. Conduct thorough research, read reviews, and engage in discussions with potential partners to make an informed decision.

Also Read: Revolutionizing the Financial Landscape: The Transformative Influence of Blockchain in Fintech

Top Fintech Companies To Learn From

The finance industry is buzzing with innovation, and learning from the best can give your ventures a significant edge. Here are some top fintech brands to study and draw inspiration from:

• Klarna 

Klarna, a Swedish fintech giant, has revolutionized the e-commerce payment experience. It is the largest BNPL service with over 147 million active users. By offering buy now, pay later options, Klarna has simplified and enhanced the checkout process. Learning from Klarna's success, consider implementing innovative payment solutions that cater to your customers' changing needs.

• N26

N26 is a prime example of a mobile banking startup that has disrupted the traditional banking landscape. Founded in 2013, within a decade, it became a global sensation with 8 million registered users. By providing a seamless and user-friendly banking experience through its mobile app, N26 has quickly gained customer trust. Emulate N26's customer-centric approach by ensuring a simple yet seamless user experience for your fintech startup.

• Stripe 

Stripe has transformed the world of online payments and is valued at $95 billion. It is a SaaS company specializing in payment processing software and application programming interfaces for e-commerce websites and mobile applications. Stripe’s extensive integration capabilities have made it a preferred choice for businesses of all sizes.

• Robinhood

Robinhood was valued at $11 billion in 2023. It has democratized stock trading by offering commission-free trades and making investing accessible to the masses. Robinhood's disruptive approach simplifies complex financial processes and makes them more accessible to a broader audience. Robinhood primarily generates revenue from its Gold memberships and charges interest on stock holdings.

By actively learning top brands, you can equip your fintech app development solution with the knowledge and inspiration needed to thrive in this dynamic ecosystem. 

How Does Apptunix Assist You In Fintech App Development?

In conclusion, succeeding in the fintech industry requires a methodological approach. Understand that failure is a part of success if you learn from it. As a leading Fintech app development company, Apptunix boosts the expertise of 250+ tech enthusiasts who turn your vision into a long-term success.

Apptunix has helped fintech startups to raise million-dollar funds. And, we can assist you in building the next multi-million dollar fintech app solution with best practices. Partner with us and drive success – the Apptunix’s way.