In a previous post, we provided a look into some of the regulatory processes and license requirements for financial technology (fintech) companies in Nigeria. In this follow up article, we provide an overview of some of the things you need to know and do before registering a fintech company. This is a general overview of what to expect which then narrows down and focuses on essential personnel that should be part of any fintech company from the beginning.
Step 1: Determine Your Niche
As with any business venture, starting a fintech company would require you to define your goals and what you hope your company would achieve. For fintech companies, this would involve figuring out which fintech category your company would belong to. There are various fields in fintech which have been categorized into three main groups: a) Fund Movement, or transactions by giving or receiving payments. The services in this category include currency, payment solution, remittances; b) Fund Placement, or the financing of planned or unplanned financial regulations which includes specific services such as saving, investing, borrowing, and alternative financing; c) Data Management, to get insights for improving decision making this includes providing financial management tools and research and data.
Knowing the which category your company belong to can help to determine the specific licenses your company would require, as well as determine how you would like to present your company’s services, what your target demographic is, etc. Knowing your niche can also help you identify what makes your company stand out from others like it. With so many players in the fintech market, it will be necessary to have a distinguishing factor that can easily set you apart from other companies. You can only achieve this when you become precise with the solution you want to offer and how you want to do it.
Step 2: Know the Regulations
Knowing what services, you wish to offer is great, however, since the fintech industry is a strictly regulated one, you would need to be familiar with the regulatory processes and authorities, laws that guide the activities within the industry, legal limitations and requirements, etc. We provide an overview of the licensing and regulatory bodies and laws in this post.
Step 3: Raise Capital
Depending on whom you ask, raising capital for your company is probably the first thing you should do. However, we have listed it as the third thing you should do because, to convince anyone to invest in your company, you have to prove that you have a good understanding of what you want to achieve and how you will navigate the industry's rules and regulations and come out profitable.
So, how do you raise money when you are a financial tech startup? This article summarizes four ways to do this: through Accelerators, Venture Funds, Business Angels, and Initial Coin Offerings.
Pre-accelerators and accelerators are, are fixed-term programs that can provide seed investment, connections, sales, mentorship, educational resources, etc. which can accelerate the growth of your company. In Europe, for instance, accelerators tend to provide tracking programs, consulting services and investments that can range from €10,000 to more than a €100,000.
Similarly, venture fund, or venture capital, often provide financing to startups that have high growth potential. It is always good to consider venture capitals that work with startups in the same industry as your company, so in this case, you would like to consider firms that have successfully financed fintechs in Nigeria.
Private investors who fund startups are often referred to as business angels, and for some businesses, this might be how they get financed. It is an easy path to getting funding as the process can be less bureaucratic and more direct since you would be dealing with an individual or a group that has a vested interest in your business.
Finally, an Initial Coin Offering is a type of crowdfunding which is specifically used in the cryptocurrency sphere. This type of funding allows a company to give tokens to investors at a certain price, the money gathered is then used to grow the business. It is worth noting that having a token does not afford investors the same rights as shares and thus they will have no say in executive decisions.
Step 4: Build Your Team
You cannot build a successful business enterprise without the right people on your team, and with fintechs, there is so much more to consider than would be the case if you were starting any other company. As indicated by the name, financial technology companies often provide financial solutions using modern technology and so a crucial part of the initial fintech team would require a high-tech individual or a group of them. There is also a need to have people on the team who are proficient at marketing services and particularly those who understand what your company is setting out to achieve and can speak authoritatively on it. Finally, there is a need to have people who have sound knowledge of financial and legal operations to guide the activities of the company. This personnel are discussed in detail below.
Product Design Team: Most fintechs launch into the market offering certain kinds of financial products. The potential use of these products would typically attract investors who can help grow your business, and eventually, the users whom the product was targeted at in the first place. However, except the founders of the fintech have the necessary skills needed, and even if they do, it will be necessary to hire a team of product designers and developers to help with designing the User Experience (UX) and User Interface (UI), as well as coordinate the programming, engineering needs of the company. For a product to be profitable, it needs to satisfy customers’ needs; be able to respond to the personalized requests; and focus on mobile phone solutions which are now, perhaps, the more popular way to reach customers. Your product designers, ideally, will be people who can demonstrate agile development capabilities, be highly active, flexible, and adaptive. The key positions for the product design team include Product Manager or Chief Product Officer who will oversee the Product Design Team.
Marketing Team: Marketing is important for new companies because, without a proactive approach to spreading the word about your company, few people or no one at all would know it exists. This brings us to the role of a marketing team when building a financial technology company. Ideally, these are people who understand your company’s vision and mission and can create marketing plans which would effectively convey these vision and mission to the rest of the world. The Chief Marketing Officer of fintech startup from London, Anna Kilmurray, said: “A good marketing expert should organize focus groups to analyze the usage psychology and behaviour of the customers. Even better, he or she should have a basic understanding of Search Engine Optimization (SEO), content marketing, and coding to be able to effectively communicate with the team and to come up with new initiatives that are appropriate for the audience.”
Finance and Accounting Team: Having a sound finance and accounting team is a no-brainer for a fintech company, however, it is worth stressing. For this team, you should prioritize the role of the Vice President (VP) Finance and (or) the Chief Financial Officer (CFO). Ideally, these individuals will have a very good grasp of practical financial and accounting strategies and will be able to make analyses, determine budget estimates, and oversee the financial management of your company. Both or either individual can serve as controllers, responsible for the storage of documents and the regulation of salary payments. They must have excellent negotiation skills as their roles would require them to negotiate with partners, vendors, and other parties as required by the company.
Legal Team: The legal team is an essential part of any startup company, and fintechs particularly. Since they operate in a heavily regulated industry, fintechs need a solid legal team that can help them wade through the wave of regulations and license requirements so they can successfully set up and operate their businesses. Legal teams are also important for planning strategies, analyzing exposures to risk, and supporting the management of those risks, all of which are crucial for the growth of the company. It is suggested that companies should hire a legal counsel that has a minimum of 4-10 years of experience and one who also understands the nature of the business your company will be engaged in. Someone with a previous experience working with startups is ideal.
This list is useful for getting you started on your path to launching a fintech company. Follow the links below if you would like more information on things to consider while preparing to launch a fintech.