7 key factors to run a FinTech startup in a competitive Indian market

Everyone loves the buzzword FinTech, and in the last five years, this industry has exploded wiping out lending models, investment models, banking and transactions along with even foreign remittances and insurance.

Read more: How the shift to voice payments will change the digital payment landscape in India in 2023

The FinTech industry now has seen more than 30,000 startups across the world, with a 2.5 times increase in the last three years. FinTech adoption at the retail level has increased from a mere 5-6% five years ago to more than 50% as of 2022. Being the third largest FinTech ecosystem in the world, India stands at the forefront of beating the US and China, at a growth rate of 22% YoY.

With the right set of strategies, one has the true potential of scaling a small startup into a large business in no time, and since India continues to offer countless number of opportunities to founders from each stream, it’s just about setting the right blocks together to build a formidable business

But what is crucial is to know how difficult it is to run a FinTech firm in this ever changing landscape of tech and finance bundled together.

There are seven key factors that one needs to consider, before taking that big step.

1. Regulatory Framework

With the evolving financial markets, regulations and regulatory bodies don’t only have to be up to date but also be receptive to future technologies that can be built around the existing framework. Since Indian markets are still relatively new to the FinTech landscape, the rules and regulations constantly evolve in the interest of retail consumers. Therefore, staying well informed and flexible, and monitoring these compliances, is the first step to knowing the extent to which a business can operate.

2. Identifying your niche and distinguishing from your competitors

India has more than 7500 FinTech startups, however, with cross border regulations being fairly limited, the total size of 30,000 startups come up to be your go to competition. It’s fairly important to identify your MOAT and study the competition surrounding it. Either decades old businesses getting into your niche or a new startup that has come up with a similar game plan, it’s important to research what the market has to offer and structure your offerings accordingly. It’s not always necessary to be different, but it’s important to know that the end customer should be aware of your offering to successfully use it to its full potential.

3. Hire / partner the right set of talent

Good talent is always welcome, however finding or partnering with the right set of talent and knowing your competencies and gaps are extremely important. The hiring strategy needs to be set in place knowing the balance between experience and new age thinking. The right set of talent will always allow you to focus on building an organization, rather than managing one. Since FinTech as a subject matter itself is extensive in nature, gathering the perfect set of experts in each area of your business will help the founders in concentrating on the growth of the company. It is also important to identify people who want to work with you in an ever changing environment welcoming changes and adaptations, then focusing on their core area of work in an existing manner.

4. Source of funding and scalable revenue streams

One of the few reasons why only a few FinTech succeeds is due to the inability of finding the right source of funding and sustainable scalable revenue streams that help grow the business. A good founder will always build the business basis of revenue streams that can be generated and scaled over a few years to make the company profitable as soon as it can, rather than being in a complete cash burn situation across years to come. Since times have changed, investor markets also identify good profit making scalable businesses that can provide the set of return on their investment in a shorter time span. It’s also important to time your funding requirements along with the type, for example, if the business is fairly profitable at an EBITDA level, then rather than raising equity, leveraging on your assets or taking venture debt might be far more beneficial, knowing that the cost of raising equity money is expensive.

5. Focus on innovation and technology

Most new businesses or verticals focus on constantly evolving in this market of new requirements. Even though a new niche or gap has been identified, it is well known that once you taste success others will enter your carved out market. It’s fairly important to invest in your R&D across front end and back end tech, along with new forms of innovation that can help build new revenue streams or cut down your long term expenses. With new forms of technology across AI, ML, blockchain, cloud computing, digital infrastructure, etc. it’s critical to indeterminate the usage of these technologies across your businesses and how it can lead to sustainable scaling.

6. Understand your customer and keep your CAC low

Once the business commences, go to the market and do a good tangible market study. Understanding your customer and knowing the key pain points, can always help you in knowing the target market requirements in detail. It’s the finer details or the smaller things that matter more, to keep the customer happy and have a good CLTV (customer lifetime value). Even though there is a fair bit of marketing spend that goes into analyzing and understanding your customers, try to keep your customer acquisition cost as low as possible, since there is no end to marketing campaigns, if it doesn’t deliver you a good ROI.

7. Trust your instincts

Eventually, apart from all the expert advice and valuable inputs you get from industry folks, it’s necessary to focus on your instincts and value your ideas. An entrepreneur always has to think out of the box and give credit to their critical thinking on any market offering. Unless you execute, you will never know where this takes place, and with this competitive market it’s highly plausible that someone else could be imagining a similar situation.

With the right set of strategies, one has the true potential of scaling a small startup into a large business in no time, and since India continues to offer countless number of opportunities to founders from each stream, it’s just about setting the right blocks together to build a formidable business.