Today over seventy-five percent of individuals use fintech products, and their expectations for services not only remain high, but they’re continually growing. They’re looking for faster payments, cheaper services, and other personalized offerings. Currently, fintech, or financial technology, is a roomy term that describes both startups and SMEs providing financial services through the use of modern technologies.
Indeed, more and more financial institutions realize the importance of digitalization for the sake of prosperity. Their goal is to automate financial operations, make them more effective and accessible to end-users. However, most banks tend to experience difficulties integrating innovative solutions into the existing business models, caused by their sluggish legacy IT systems or lack of talent in-house, that is why they extensively outsource these functions to third-parties.
If you also consider making your business go digital, it is important to learn about the peculiarities of fintech product development, since it significantly differs from other digital solutions in terms of features, architecture, and implementation approaches. Moreover, the process requires a solid understanding of banking processes and regulations. Some of these points, including company types and industry drivers, we’ve already got covered in our previous article. In this post, we’ll delve into the fintech ecosystem and start with an idea: its elements, market validation, and problems you may face during the implementation.
Start with defining your fintech startup idea
At this point, it’s critical to know your target audience, so allow enough time to discover their needs and expectations, as well as to figure out ways to address them. Based on our experience, an accurate time-and-cost estimation can take up to four months since it involves certain artifacts to be taken into consideration prior to development:
- Product vision. This document describes the purpose of the product, articulates the issues it should resolve, and the actions to be taken for its achievement. It should explain a bigger mission and inspire every team member to do their best.
- Product scope. It defines all the elements of the future product along with its functionality and appearance. Clear product specifications are must-haves to assess the required amount of effort as accurately as possible. We recommend agreeing on the scope at the initiation stage to avoid unnecessary costs and complications throughout the development process.
- Visual design. Working with fintech businesses for over six years now, we can claim that most people are visual learners, so they need wireframes, designs, and prototypes to be able to shape their vision of the product. Design requires less investment than the actual product elaboration and can serve as a proof of concept, demonstrating the feasibility of the idea to a focus group.
- Regulation checking. Fintech products differ from standard applications, like social media or shopping solutions, since they have many requirements from the regulators and organizations controlling their business. The initial software requirements specification should cover account structure, balance management, reports, and customer support activity.
- Architectural design. Having a good grasp of user-centered features, sophisticated visual techniques, and regulatory requirements allows the development team to build scalable and robust architectural solutions essential for seamless future updates. Business continuity is crucial for a digital bank, as its customers are fully dependent on apps providing access to their accounts.
- Single source of truth (SSOT). This concept presupposes the existence of a single body of knowledge to make sure that all team members work towards a common goal and rely upon the same data while making business decisions. Such a database frees workers from the necessity to compare the information obtained from multiple sources and helps to avoid confusion.
Proceed with market research: will fintech products and services meet the demand?
As soon as you have decided on the idea, don’t rush to put it into practice. We always recommend taking additional steps to be sure that the product-to-be is competitive enough to carve out a niche and appeal to potential customers.
- Research the market. First, check if there is a high demand for the product or service you are going to deliver. Then get acquainted with competitors’ offers, learn about the strengths and weaknesses of their products to figure out whether you can come up with an advanced solution.
- Validate the idea. As soon as the first graphic prototype is created, get an impartial focus group to test it. They can point out weaknesses and make suggestions on what improvements can be made. We don’t recommend involving friends or family in the process, as they may be positively biased and, consequently, fail to assess your idea objectively.
- Adopt a customer-focused development methodology. This approach implies getting to know your customers’ actual needs and preferences before starting the development. Having identified your potential audience, you should decide on the best channel to reach them, pricing tactics, actions related to product delivery, and others. In other words, it is the process of discovering, testing, and validating your business assumptions. It would be wrong to think that if customers have not appreciated the product upon its release, you would be able to prove its usefulness with the explanation.
Typical issues in fintech product development and how to solve them
Now let’s move to the problems you may face when embarking on the fintech software development process.
- Product copycatting. We often witness or hear about situations where business owners think of creating a copy of the product already present on the market to build a new functionality after a while. They believe that duplicating a product that has already proved its value to customers can’t but succeed. However, users are reluctant to switch to new digital products having no additional benefit in comparison with the ones in use. Thus, think of some unprecedented features to complement your product and so to make it stand out of similar market offers. Keep in mind that fintech products are integrated with other services, so this can be a source of inspiration for elaborating something truly innovative.
- CEO dependency. Any product development process starts with a CEO, as he acts as a visioner having a clear idea of what he wants to achieve. Design, marketing, and business strategies, along with the development roadmap, need the leader’s total involvement. Nevertheless, the team should be able to act independently of a CEO, as he is not physically able to approve of every member’s action. It can be possible only through practicing a single source of truth mentioned above.
- Consistency of approach. Every department team leader should create internal guidelines for their teams on what procedure to follow when performing their job. For instance, designers need to agree on the usage of various elements, their positioning, and interaction styles. Each member’s piece of work should fit into the design ecosystem. Otherwise, even though each section color is the same, there will be no unified style, and the application interface will not appeal to customers. Another example is related to programming style and includes a set of rules for writing source code for a piece of software. It should be elaborated so that developers could produce a concise, easily readable, and maintainable code base. Such an approach simplifies the onboarding of new people and excludes the Frankenstein-like approach to application development.
- Strategic alignment. Every solution is developed in line with product, business, and marketing strategies. They are aimed at building a product roadmap, strengthening business performance, and launching promotion campaigns, respectively. All the planned activities should be documented to avoid uncoordinated actions compromising the whole development process.
- PoC and MVP synchronization. PoC illustrates some technical features but never includes all the characteristics inherent in the final product version. It is aimed at merely proving the idea feasibility to investors and has no robust infrastructure. The next stage refers to the development of the minimum viable product (MVP). It involves producing a version equipped with just enough features to get early customers’ approval and provide the team with feedback on further improvements. MVP covers end-to-end scenarios and emphasizes the key product identifier, as well as uses the same infrastructure that is planned for the final version but is rather small-scaled. A common mistake most startups make is related to building an MVP on top of PoC since changing the existing architectural solution may take even more time than developing the new one from scratch.
- Figures tracking. After product releases, companies start the monitoring process. Customer satisfaction and trustability become one of the most important criteria measuring the success of a fintech application. The number of monthly active users (MAU) and daily active users (DAU) shows how popular the software is. These and other indicators, like the acquisition cost and net profit, should be tracked too. Meanwhile, metrics criteria should be based on the strategies discussed above. In the case of low-efficiency performance, the company should respond immediately to change the situation for the better.
- Underestimation of modern technologies. The use of innovations is sure to bring your business to a whole new level. The integration of data science technologies with fintech solutions enables advanced personalization and product analysis, whereas machine learning (ML) and artificial Intelligence (AI) can improve user experience. The good news is that you don’t have to develop anything from scratch. There are ready-to-install solutions providers, like Microsoft Azure or Amazon AWS, which have a comprehensive set of tools for businesses to improve their performance. Fintech has adopted some of the approaches specific to other industries. For example, there is a digital twin technology used for creating a digital copy of a physical entity, which is extensively utilized during the development process.
As we can see, fintech mobile app development is a complex process that requires taking specific steps at each of its phases. The challenge of building an in-demand product is complicated by numerous regulations specific to the fintech domain. Nevertheless, it is worth the effort, as the move toward digital transformation is essential for financial institutions to remain competitive and provide the most advanced services. The next article will focus on third-parties involvement and the issues related to solutions integration. If you need any further explanation on the discussed aspects or seek expert assistance with your idea implementation, you can reach us via our contact form.