Monday, June 24, 2024

What Should Entrepreneurs Expect While Establishing A Fintech Startup? | Güven Aytaş, EMBank

Fintech is a compound of two themes that accompany human history: finance and technology. Etymologically speaking, finance derives from “fin” meaning “settlement” and technology from “techne” meaning “craft”.

Crafts used to be the wheel, chariots, windmills, etc., helping people. Fast forward a few centuries; fintechs use today’s craft – computers and the Internet – to help people and businesses with their numerous endeavors.

Today, we experience a digital transformation that dissolves boundaries, not just for people but for businesses and industries, too. Fintech is one space where this transformation is more prominent, and many entrepreneurs and investors are drawn to it. Hundreds of fintech startups join the world stage each year. But what does it take to survive and flourish in fintech?

“A good fintech entrepreneur should not only have the idea but should contextualize it by defining the problem and the solution in detail”

Traits of a good fintech entrepreneur

Well-known entrepreneurs are often portrayed as huge dreamers, relentless followers of their ambitions and people of intuition. Just catch that bright idea and follow your dream relentlessly. As exciting as it sounds, this romantic approach is not true.

Of course, an entrepreneur must have an innovative idea but it can easily fall out of context without a well-established business plan.

A fintech business has four pillars: finance, technology, legal/compliance and sales operations. The startup team must have all four corners covered, either with the entrepreneur team’s own expertise or through their vendors and partners.

A good fintech entrepreneur should not only have the idea but he/she also should contextualize it by defining the problem and the solution in detail. Then, the idea should be encapsulated into a business case by considering how to build it upon the pillars by planning which business model to follow, what sources are needed to actualize & how and whom to sell.

Setbacks to be faced

To set up your “well-planned” fintech business, you’d require a legal advisor, an accountant and a bank account. This sounds much like what any other business would require, but for fintechs, life’s a bit harder.

For example, a safeguarding account is the first thing required by regulators in all countries from all electronic money institutions. So, you head over to a traditional bank and apply for a safeguarding account. You will be asked for a financial statement for the last 3 years. But how come a newly established business can fulfill such a request?

Opening a safeguarding account is just the first, simplest step. You will encounter other hindrances in money transfers, managing cash flow, different legal & compliance issues, sales operations issues, etc.

To manage all these aspects, a fintech business is also expected to be agile. Considering the setbacks and legacy solutions hindering the way, you may find yourself rudderless in uncharted territory.

The ultimate goal of a business is to make a profit. However, if the game is built on rapid growth and creating value concurrently, but profitability is not at the forefront, it may be a big mistake to assume that profitability will follow growth, especially in a macroeconomic environment like we are in. In such cases, the game can change into a dodgeball. Only, the one who dropped the ball before it exploded gets his share happily.

Hence, the need for a sound business plan and regular reviews of it, the team and vendors to take care of all the pillars of a fintech startup. Otherwise, it’s easy to become fragile while trying to be agile.

How would EMBank come in on this journey?

European Merchant Bank is a fintech-friendly challenger bank with a good understanding of and experience in the fintech ecosystem. EMBank helps fintech institutions obtain safeguarding accounts for EMI, PI or PSP but also the infrastructure to build the system upon as long as the business is well-established.

Apart from lubricating the necessary banking operations and providing the API-based platform ready for operation, EMBank offers something that legacy banks cannot, and many challenger banks don’t: Acting as a true partner with the “Digitial Banking with a Human Touch” motto.

European Merchant Bank has vast, unparalleled experience in the fintech ecosystem. We have worked with fintech businesses in different phases of their development, in different countries/regions, offering a variety of products and services.

We’d be happy to hear out your plans and work on a roadmap suited to your needs.

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