Samir Pekaz
Senior Product Manager @ d.labs
Fintech apps are taking over the world. No seriously, they are the mainstream now. Just a few years back banks in the UK were struggling to provide usable digital solution (read: web/mobile platform) and most of the things were done over the counter in the branch. Long gone times, thank the Universe for that.
Embarking on the journey of Product discovery for a fintech app is a complex yet exciting process. To ensure your product is viable, innovative, and meets regulatory standards, you will go through motions and phases as with any startup idea (planning, research, ideation, experimentation and validation), but here are some selected considerations and essential steps you will need to go through when building a FinTech product.
This is not where you start your product discovery but eventually, you will get to nailing down the base or core functionality. Once when you align the needs of the market with your solution, do not forget to align it with current (and potentially upcoming) regulation. This is where things might get tricky for validating your startup idea. For example, you might come to understand that you are not allowed to do certain things or offer certain functionalities without being previously authorised by a regulatory body.
Many options and solutions will then come out of this, so keep finding answers and checking (and double-checking) your facts. For instance, during a recent d.labs project, we discovered the 90-day re-authentication rule for accessing bank accounts, which significantly altered our user experience and made us rethink certain features.
You will most likely not build everything you need for your Fintech app by yourself, especially if you are early stage. Put simply, it costs too much. Following the logic of startups, you will then most likely seek out third-party providers that fit your case. Selecting the right third-party providers is crucial for ensuring broad bank coverage and seamless integration(s). Switching providers down the line is a costly, gruesome and time-consuming process. There, I said it.
Your provider should cover a significant percentage of banks and bank accounts in your target market from the start. If your strategy allows, you may be able to start with a provider that offers limited coverage to prove your case, but then as you progress you find ways to get more coverage.
Inevitably you will have to get on calls with different providers and ask questions. Questions like: What percentage of banks do you cover? Does your coverage include personal or business accounts also? What geographies do you cover now and what markets do you plan to expand to next? I typically take it as a good sign when the provider has a lot of qualifying questions back and a firm process of how they vet potential clients (you).
Navigating the regulatory landscape is one of the biggest challenges in fintech. It’s one of those, how can I say - it will make you grow grey hair type of a thing. You need to be compliant with various regulations, including those set by the Financial Conduct Authority (FCA) in the UK and the European Banking Authority (EBA) if you are building in Europe. Your region, business case, product functionality and infrastructure dictate which regulation you need to adhere to.
Depending on your business model you will need to understand in detail which licences you need and how to obtain them. Such as Account Information Service Provider (AISP) and Payment Initiation Service Provider (PISP) licenses. These allow you to access customer data and initiate payments on their behalf, respectively. If you hold money in a bank account, you would have to obtain a banking licence. If you facilitate payments, you have to make sure you can transfer the money, with the proper licenses in place (Money Transfer Licence). Having these or other licences in place will most likely require either you work with external consultants or your company having to employ for legal roles (think Head of/Chief Compliance officer).
There are third-party providers that are open for partnering up with and if is you can “use” their license (effectively you operate under their licence). This can expedite the Go-to-market process for up to 9 months or more and reduce initial hurdles. The best and probably most correct advice here is to get legal/compliance and technical advice the earliest you can.
Understanding the costs associated with building a Fintech product and using Open Banking is essential. Next to your Ui/Ux design, software development, integration costs, and ongoing support fees, there are licensing fees as well to account for. For startups, it’s important to find ways to minimise these expenses without compromising on functionality or security.
One way to do more with less is by utilising regulatory sandboxes provided by entities like the FCA. These sandboxes allow you to test your product in a controlled environment, reducing risk and cost. Additionally, partnering with providers that offer scalable pricing models can help manage costs as you grow.
Selecting software infrastructure partners is one of the most important decisions you will make. The process is often protracted, but it’s crucial. Technical integration with third-party providers should be seamless and well-documented. Choose providers that have a good reputation, and offer comprehensive API documentation and support to ensure smooth integration. Evaluate providers based on their coverage, API robustness and compliance with regulations like PSD2 (for Europe).
Security cannot be overstated. Ensure that your provider adheres to industry best practices for data protection, such as ISO27001 or similar certification, and has systems in place to monitor and address vulnerabilities in real time.
Ongoing support is equally important. Your provider of choice should offer responsive customer support and potentially a dedicated customer success manager. This is crucial for resolving issues quickly and maintaining the smooth operation of your app. There is potentially nothing as stressful as having an issue on the supplier end that affects your product but you can’t get around it.
On your journey of developing a Fintech product, you will need to be very organised and tenacious, plan well and build strategic partnerships. By focusing on essential product features, wide coverage with partners, compliance with legal requirements, cost control and solid integrations you can make an app that not only fits the market but also stands out.
Don’t just build a cool app, build a product to create a new market, move customers, and inspire FOMO in investors. 90+ startups have pushed towards the exit with d.labs already. In case you need help deciding on partners or building your Fintech app, we are just a couple of clicks away. Let’s have a chat about your future with d.labs.
