Challenges faced by Indian FinTech start-ups are similar to those faced by adventurous voyagers in the past. Filled with enthusiasm and determination to tackle the unknown, these voyagers would build ships and venture out into the unpredictable seas in search of prosperous lands. Young FinTech companies in India are also stepping out of their comfort zones and aspiring to make it big, just like their motivated ancestors.
A PwC report stated that India offers the highest Return on Investment (ROI) on FinTech projects at 29% versus a global average of 20%. Listed below are six challenges that act as hurdles for FinTech companies to achieve this ROI.
Regulatory norms often determine the number of barriers to enter into any industry, for example – the limit on foreign investment. Start-ups can move ahead with their ships when such gates are open. They need finance to keep going, that’s where venture capitalists and funding come into picture. Less finance would mean a smaller ship, possibly a boat.
Limited experience and constant pressure from investors regarding ROI, torments start-ups during their initial phase. Once such bludgeoning winds are braved, then it is all about trusting fellow mates and moving ahead.
The FinTech ship needs dedicated crew members. Those who will not abandon it midway and will back each other during tough times. Often, it is about finding the right mix. If the start-up’s founder has the requisite expertise regarding a domain, then the team can revolve around him. Talented, novice recruits can then be hired to fill in the missing pieces of the puzzle.
Acquiring the right talent and retaining it is a challenge faced by FinTech start-ups, especially if there is a specific skill set required. For example – UX Designers. Inexperienced employees might not have the practical exposure while experienced individuals might not be ready to join a less-structured start-up.
When the ship reaches its destination, it will find an audience by the shore. The Government of India as well as brands across industries have invested in acquainting the audience with an online and mobile app interface. Millennials are tech-savvy, and people younger than them are naturally inquisitive when it comes to going digital. In a few years’ time, Indian audience will be entirely comfortable with the digital life. However, when it comes to FinTech products and services, there is a gap regarding people’s current ability, desire, and need.
For example, people are used to purchasing t-shirts online, getting them to purchase insurance the same way is a task. This gap will be reduced eventually. The challenge for FinTech & InsurTech companies is to help users migrate online and make them comfortable till this gap is reduced.
The audience might welcome the FinTech ship, however, their competitors might not share the same welcoming sentiment. FinTech start-ups will have to consider the following points about market dynamics.
- The number of competitors and their market share
- Their own strengths and weaknesses
- Customer loyalty
- Buyer’s market or a seller’s market
- Price sensitivity and differentiation
These points might be applicable to companies across domains but they hold more weightage for new FinTech companies.
Once a territory is conquered, it needs to be fortified, while being on the lookout for new horizons as well. Dealing with market dynamics and becoming a leading brand is one thing, and staying there is another.
FinTech start-ups need to stay ahead of the game. Traditional players present in the arena might be slow to adapt to the digital revolution. However, considering the resources at their disposal, they will not take time to catch-up and move ahead if start-ups are caught snoozing.
Fleets and territories can be vulnerable to threats. FinTech companies are fueled by data, and data is susceptible to risks. Money is just a number in the digital world and the biggest fear of an online consumer is that the number in the bank account might vanish overnight!
Users will transact online freely if they feel secure. FinTech companies need to bulk up their cyber security as compared to general players across industries. Minor leak could cause major damage for FinTech companies.
Once FinTech companies overcome these six challenges, then it is smooth sailing ahead. Generally, investors fund start-ups that are scalable. And once the fundamentals are in place, it is about unhindered growth.
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