Not everyone can do everything: Things FinTech businesses should keep their eye on

Not everyone can do everything: Things FinTech businesses should keep their eye on

Digital technologies instigate the advancements of today’s business. Modern applications continue to replace routine and mechanic work; banks are forced to lower prices for many of their services. In addition, the ongoing global pandemic catalyzes technological changes and will undoubtedly bring further developments.

New world order emerges from the collision of analogue and digital worlds, while the collision and symbiosis of technology and finance has led to the emergence of FinTech. Businesses in the Financial Technology sector are not usually the ones to lack enthusiasm or energy, but the regulatory, operational, financial, and planning issues may become obstacles for such companies. 

Below we provide the most important practical recommendations that will help your FinTech company succeed. 

Recommendation 1: Refine your business model and correct your inaccurate financial plans

Starting from the beginning, the most common stumbling blocks are inaccurate business models and financial planning. There are often gaps and the investment background is planned too short. Experts believe that 8 to 90 percent of startups fail in the first three years – there can be several reasons for that.

Take time, for example: the business idea is brought to the market either too early or too late. No relevance: the business idea does not reach the target group, or the offer lacks a clear value proposition and positioning. Additionally, the price may not be appropriate. Ultimately, it is important for the business model to be quickly scalable.

In addition, every FinTech company must find ways to finance future business developments early on: bootstrap, attract external investments, or welcome new partners.

Recommendation 2: Keep an eye on sales channels, maintain focus and be ready change course

The founders and the team are often so confident about their own product that little thought is given to sales and marketing channels. They are, however, very important because sales are never an assured success. Are there connections with necessary partners, platforms, activities in place? This is also closely tied to the next hurdle – the loss of focus. There are dozens of options that open up in the beginning. A systematic benefit analysis is the only way to keep your focus on the essential things, the core of the business model.

Occasionally, help can come from outside consultants, who can ask the management team the right questions about their day-to-day business activities. Sometimes, it may require you to find the courage to change course. Necessary changes in direction can save your business model. But perceiving, accepting, and implementing this from the inside perspective often requires impulses from the outside.

Recommendation 3: Do proper risk management and ensure compliance with financial market laws and regulations 

Assessing risks and identifying potential crises in advance are important steps towards great planning security and corporate success. A thorough and comprehensive risk analysis is also useful. Continuous monitoring and systematic control by the company's own managers or external credit agencies are essential for the long- term success of a company. Incidentally, the establishment of an adequate risk management system also massively facilitates the search for investors.

In addition to risk management, laws’ provisions, legal and regulatory requirements are often overlooked. In consulting practice, illegal activities under the Banking Act or another financial market law are not uncommon, which can lead to the liquidation of the company. Here, experts with extensive experience in the financial industry, and practical know-how in regulatory compliance and operations will be of great use to FinTech businesses.

Recommendation 4: Implement compliance procedures and look out for financial crime 

Compliance is a hot topic and for a good reason. FinTech companies should have full-stack compliance measures professionally integrated into their corporate culture and business strategy from the very beginning. My experience shows that financial crime, in particular, is largely underestimated by many FinTech companies. But any innovative financial business can suffer from financial crime.

This is all while the technology sector’s international standards and regulations are just emerging and it can be quite difficult to find qualified compliance staff. Particularly noteworthy is the vulnerability of FinTech projects to terrorist financing, because - in contrast to banks - they work with relatively small sums and terrorist financing transactions split across small payments.

Preventive measures in this area are oftentimes not satisfactory.

Recommendation 5: Ensure sufficient resources and the right team composition

The right team composition, comprised of both internal and external team members, including the board of directors, is a cornerstone of success for a FinTech company. Diversity is a must, and so are the experts with technological backgrounds and experts with the practical experience from the financial industry with a shared vision. A person with an all-round view is an essential team-member and almost worth their weight in gold. External solutions are very suitable for startups: on the one hand, they are cost-saving; and on the other hand, they allow for involvement of qualified staff. In this way, sufficient resources can be secured.

Lamara von Albertini is the founder and managing director of the consulting company von Albertini Compliance Services, which advises financial service providers on legal and regulatory issues, with much attention being paid to startups and FinTech projects.

Because of her 20 years of experience in the financial industry in the areas of legal, compliance, and risk management, Lamara has a broad and extensive knowledge of financial market regulation, governance, compliance and risk management. She advises her customers on legal, regulatory, operations, and management.

Before founding her own company, Lamara von Albertini worked at various banks and in a Zurich law firm. She is the co-founder and managing director of the FidlegAcademy in Switzerland and a board member of a bank.

If you require expert legal help for your FinTech project - feel free to connect with Lamara on the Legal Nodes Platform.

Disclaimer: the information in this article is provided for informational purposes only. You should not construe any such information as legal, business, tax, investment, trading, financial, or other advice. 

Lamara von Albertini, PhD

Regulatory Lawyer, Compliance Expert

This article was originally published in German on the MoneyToday.ch news platform.