The development of the fintech market is still a hot topic in the financial industry, and there are no signs that it’ll change anytime soon, especially looking at the numbers in this industry. The fintech market is estimated to reach over USD 266.9 billion by 2027.
What are the challenges for novice fintech, and what mistakes should they refrain from to avoid business failure?


1. Insufficient financing time

Quite a lot has already been said about the importance of ensuring financial liquidity at the initial stage of fintech development, and it’s not worth repeating it here. The issue of obtaining financing is one thing, but ensuring that this support is sufficient to exceed the break-even point is a completely different problem.

We’re observing the market of beginner fintech, and we’ve noticed that such entities too often underestimate the time – and thus the costs – of their activity in the period preceding their product launch. As a result, they’re left without funds halfway, with an unfinished product, massive marketing expenditure needed, recurring operating costs, and an idea that could work if only the complexity of the topic and financing were better understood at the start of the venture.


2. An overly simplified approach to the issue of technology

Let me tell a little anecdote here. We once started talks with a potential client, who was planning a financial activity. He had a business plan ready, an idea for a simple product, and marketing. However, to our question, “How do you want to collect and process data about your customers’ transactions?” he replied in a very serious tone: “It will be done with Excel”. It took a while for the client to realize that Excel wouldn’t work here.

After all, it’s all about money and financial data, and people don’t entrust these to partners they don’t trust.

This may be a very extreme example, but it clearly illustrates how fintech start-ups treat the back office of their product – as an addition to the beautiful “packaging” of the front-end application offered. Meanwhile, what works “in the back room” is not an addition, but rather a core of the entire undertaking. Therefore, when deciding to develop a financial product, you should first and foremost take care of the technological layer that will process data and transactions in an efficient, comprehensive, and regulatorily compliant way. Why do we need a great-looking application for modern payments, if it turns out that due to technical “flaws” and “holes“, it doesn’t meet customer expectations and doesn’t inspire trust?
After all, it’s all about money and financial data, and people don’t entrust these to partners they don’t trust.


3. Lack of MVP

This is also a strong trend that I see when working with startups in the fintech industry. Young companies want to offer the maximum benefits of their product in the shortest possible time. However, from a business perspective, and especially in an uncertain startup environment, sometimes “less is more“, which is why creating an MVP is so important.

The minimum viable product (MVP) is a working product with minimum functionality, allowing you to test the profitability of a given project on the target group. It’s worth using this solution because it allows you to verify the business model at a very early stage of the business and in the worst case to avoid losing a huge amount of money, which would undoubtedly happen if you decided to release the full solution.

Often, a fintech customer prefers to use services in a narrow range, gaining trust in a new entity, to start using new functionalities over time. In such a situation, starting by launching a narrow range of services, but well-thought-out and reliably operating may be the optimal solution for a newly established business.


4. “We do what others do” approach

If I got a dollar for every time I hear, “It works for them, so we’ll do the same”, I’d be a millionaire. Blindly following your competition and duplicating what already exists has little to do with innovation, and more with following the path of the least resistance.

What’s more, this approach generates a lot of risks, as fintech business models differ significantly from each other, which requires a lot of flexibility both in terms of product creation, and communication issues or target group.

And it’s precisely this flexibility that fintechs lack; instead of following their own path, choosing solutions that are seemingly proven, but incompatible with the specifics of their own business. The effect of such actions is very easy to predict and, unfortunately, not very positive. Fintechs should win against banks with their innovation, courage, and willingness to take greater risks that banks can’t afford. Following the “proven” model will be only a copy, requiring building an advantage through even lower prices or even greater marketing expenditure.

5. Excessive focus on ostensible innovation

If we’d check which phrases dominate the communication of modern fintech start-ups, we’d find there such words as blockchain, cryptocurrencies, machine learning, etc. It seems that today it’s almost impossible to offer a modern solution that doesn’t incorporate these technologies. It’s worse, however, when they only serve as “catchwords” with purely marketing significance, and don’t add any value to the product. Unfortunately, such tendencies are observed increasingly often, and in the end, if these solutions aren’t used properly, it simply doesn’t pay off.

The thing is that sometimes it’s better to use slightly more traditional technologies that realistically and safely respond to product requirements than to expose yourself to the risk of technical errors resulting from the implementation of unproven and relatively low-value solutions solely for the sake of poorly following market trends.

The thing is that sometimes it’s better to use slightly more traditional technologies that realistically and safely respond to product requirements than to expose yourself to the risk of technical errors resulting from the implementation of unproven and relatively low-value solutions (…)


6. Non-compliance of the product with the applicable regulations

The regulations governing the financial industry seem to be one of the most underrated aspects of fintechs’ activities. It turns out that meeting the requirements of financial supervision and obtaining a license (approval) to start financial activities is considered by many existing entities as the most difficult and time-consuming task at the beginning of the adventure in the fintech industry.

Meanwhile, beginner fintechs fall into the trap of poorly adjusting a product or service to the regulatory environment in which they operate. In the end, the planned functionalities, which were supposed to be the distinguishing feature of the service, can’t be implemented in the selected form, because they’re inconsistent with the standards, recommendations, or relevant regulatory practices. This entails several consequences, ranging from the extended time of starting a business and potential financial losses, to the reconstruction of the business model.


7. Poor selection of a technology partner

The creators of fintechs are most often visionaries, businessmen, and non-technical people. Unfortunately, this makes it easier for them to fall into the trap of choosing the wrong technology provider because they’re simply not able to properly verify the company. Of course, in an ideal world, this wouldn’t be a problem – after all, a technological partner should try to respond to the client’s needs as well as possible, and act as an advisor. However, if it were so, I wouldn’t have to so often put my head in my hands in conversations with clients and ask, “Who ruined it for you?”

Unfortunately, the technological layer of the solution is the basis of a good financial product, as I mentioned above. Picking a supplier that not only doesn’t meet the product assumptions but also creates a technological debt – which translates into the operation of applications and services – in addition to frustration generates only losses. It ends up being a waste of time, money, and trust, without which it’s difficult to build a good business relationship.

This is why I’d advise you to not treat this topic neglectfully. It’s worth asking, checking, verifying, and comparing, even if it takes a long time. From the fintech perspective, it will still “cost” less than a quick, but problematic and wrong choice.



Piotr Hanusiak is the CEO of INCAT Sp. z o.o. Prior to INCAT, Piotr was General Director of Delivery and a Member of the Management Board at Innovation Technology Group SA –a company focused on integrating IT solutions for multiple sectors; banking, utilities, and general business. Before joining ITG, Piotr performed managerial roles in the banking division at Sygnity S.A. – one of the largest tech companies involved in software production.

Piotr has extensive experience in project portfolio management, software project management, and IT Strategy. Piotr has graduated in education faculties in the field of Commercial Banking, Market Policy, and Marketing Management.

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