Fintech is fast becoming one of the most influential and profitable industries out there, so it makes sense that there are more fintech startups popping up than ever before. If you’re planning on running a fintech business, there is lots you should know about the industry such as the unpredictiabliity of it and the high levels of regulation that come with a career in fintech.
There is so much potential in the fintech industry
One of the first things you should know about fintech as a business is the position of fintech in the financial industry. You should be aware that traditional banks are still the top dogs in the finance world, however, fintech companies are beginning to pose real competition. That is because fintech companies can offer customers a wider selection in terms of both the products they are offering as well as the services. This means that customers are able to have access to easier methods of finance management.
However, most fintech companies are currently startups due to the early age of the industry, so the business is a rocky one. Although fintech companies are coming out with countless innovative and potentially world-changing ideas all the time, there is a lot of competition and there is a lot that can go wrong. Despite the challenges, there is so much potential in fintech, so if you’ve got what it takes then you can go far.
Regulation in the Fintech Industry
Both baking and fintech are extremely highly regulated industries, however, regulators are still learning about the sector. This means that there might be some uncertainty when it comes to understanding the regulations in fintech, however, you should make an effort to learn the intricacies of the regulation landscape and better protect your business from any potential regulation breaches.
When it comes to the regulation of fintech and banking, you should work out the laws where you are running your business, including any regulatory authorities, legal requirements and limitations that may be placed on your company. This is particularly important now that the General Data Protection Regulation (GDPR) has come into action, as it places a lot of importance on the protection and security of user data and information.
The GDPR is in effect on all businesses that interact with any customer data, although in the finance industry there will also be additional regulations you must follow. Depending on the country you are in, these may differ slightly, but most businesses will have to adhere to some kind of anti money laundering policies, customer compliance regulations and also be able to provide licenses to trade and operate in different areas. If you are going to be launching a global company, be aware that regulations can be very different in different countries and plan ahead accordingly so that you are staying on the right side of the law at all times.
Put a plan into place as to how you are going to approach the uncertainty in the regulation of your business and consider enlisting the help of a compliance consultant to guide you if you’re unsure.
Fintech can be very unpredictable
A traditional business is more likely to have a predictable and stable path forward including in areas such as stock prices and profitability, however, fintech companies are often very volatile. This is due to their reliance on new technologies that can either have extreme success or turn out to be a flop. As well as this, startup fintech companies especially are often low on funds which means they are unable to hire lots of staff or outsource. This means that even if a company does well, sustaining a lot of growth can be difficult and this is where many fintech companies fall short.
Data Protection is Essential
If you’re working in the fintech industry you need to be well aware of data safety. Be certain that any product you are creating is secure and is protecting all sensitive data. This is usually done through safe storage in the cloud as well as encrypting the data. This is particularly important in the fintech industry as any sensitive data that gets leaked could be used against your customers in the form of theft or blackmail, or even to commit fraud.
Everything you create should be subjected to high-level testing to identify and fix any vulnerabilities in the source code. Every network connection should be protected with transport layer security (TLS) and an HTTPS SSL certificate, as well as being sure that your prevent any API connections which are not authorised.
Right down to the framework of your infrastructure, your products should be highly secure. Make use of cloud platforms like AWS which will give your product strong protection against several types of hacking attempts, such as DDoS attacks, as well as backing up your data so that any disruptions do not negatively impact your company after they are resolved.
