10 Biggest Mistakes of Fintech Startups


June 27, 2017
10 Biggest Mistakes of Fintech Startups

For entrepreneurs in the Fintech industry, it seems as if the sun is finally rising.

For entrepreneurs in the Fintech industry, it seems as if the sun is finally rising. Once rigid in their ways, major financial institutions have demonstrated that they’re open to working with innovative new companies. A few noteworthy success stories have paved the way for alternative financing models, and first-round investment meetings have a much more optimistic atmosphere than they have in prior years. Trailblazers that pushed through uncertainty are in a position to reap the rewards. Unfortunately, it’s not all sunshine and rainbows.

From a consumer standpoint, there are plenty of new technologies on the horizon. It’s easy to look at something new and see no obvious reasons why today’s idea couldn’t become tomorrow’s reality. But it’s far from a cakewalk. No matter how innovative their ideas are, how well received the concepts are, or how strong the company’s relationships are, any of these ideas could fail. For a chance at success, it’s essential to avoid the 10 most common mistakes of Fintech startups.

1. Expecting Quick Adoption

If there is one thing the tech industry is famous for, it’s speed. It only takes a day for something to go viral. Unfortunately, Fintech doesn’t play by these rules. While banks are certainly warming up to the idea of partnering with new startups , the industry is notoriously slow at adopting anything. Take a look at Chip & Pin technology. In Europe and Canada, secured debit cards were the standard 10 years before US companies even considered a large-scale rollout.

For Fintech companies, this can prove a problem. Even if an idea is easy to integrate, ready for market, and in high demand, expecting quick adoption would be foolish. Financial processes are heavily regulated, highly secured, and have a ton of intellectual capital backing them up. Banks require piles of money and entire departments worth of labor to integrate major structural changes to their business, and Fintech companies need to be prepared for this.

2. Relying on Incomplete Market Research

In the finance industry, market research is a lot more complicated than it is with direct-to-consumer innovations. Something that may seem, at the first glance, like a revolutionary new idea could be a complete flop. Usually, problems fall into one of three categories: duplicates, dead-ends, or discreet competitors.

Duplicate ideas are the easiest to avoid. These are simple solutions that are already in place by another company. Perhaps the implementation is unique, or maybe the branding. But if there is a competitor in the market who could simply repurpose their existing platform or easily pivot into a new market is going to cause a lot of problems for a startup trying to get off the ground.

Dead-ends are solutions that have major barriers that are not immediately obvious. It’s possible that regulatory or legal issues will prevent a company from ever going to market, and this is often not realized until it’s too late.

But the biggest threat to Fintech startups is discreet competitors. Companies are notoriously tight-lipped in this industry. Often, a startup won’t even go public with their idea until they’ve established several powerful allies. There is nothing that can sink a company quicker than thinking they have a unique idea, only to find that they’re a year behind on development.

3. Raising Inadequate Capital

Running out of cash is an issue that every startup worries about from day one. What they don’t realize is how quickly a situation can go from “good” to “bad.” Often, this problem is compounded by the first mistake. A company raises money expecting to generate revenue at a certain date, only to find that the date has been pushed back.

For Fintech startups, it’s key to have financing equal to twice what you need. In the event issues do crop up, additional rounds of funding should take place much earlier than expected. Negotiations can take months, so having a little wiggle room is key.

4. Heavily Leveraging Relationships

“Who you know” is a very important part of growing a successful Fintech startup. But it’s far from the only factor. Often, startups will hire professionals who have experience in the industry they’re trying to enter with the hope that they’ll get the insider information they need to come out ahead of the competition. Other times, companies will build a relationship with a financial institution for one solution, expecting that it will make them the first choice for future innovation.

No matter how well connected a company is, as soon as pen goes to paper there will be a lot more names involved in the deal. Someone who used to have decision-making power may suddenly have other names to answer too. Business relationships are certainly an asset, but they certainly won’t replace standard business protocol.

5. Failing to Prioritize Compliance

Many Fintech startups think that they can build their idea first, shifting the compliance process into their “go to market” strategy. But in Finance, compliance is more important than almost any other industry in the world. Financial privacy laws are incredibly strict. There are specialized laws protecting investors, and regulatory issues surrounding loans.


In fact, regulatory bodies may very well be gate-keepers to Financial institutions. Until a revolutionary new financial service has gone through the appropriate process, it’s going to be a challenge to get any serious interest.

6. Keeping Quiet

With so many factors to control, it’s natural for a startup to want to get everything perfect before they go public. But many Fintech startups don’t realize who advantageous it is to be first to market. You can look at any of the most successful Fintech companies in the world.


You won’t find a single example of a company that had perfected their solution before going public. Although many of these companies had to change their approach, the public doesn’t necessarily view this as a failure. With an active PR team, a shift of focus can demonstrate a company’s agility. When trying to grab their slice of the pie, the first company to market will always look like a trailblazer.

7. Sales Before Branding

First impressions count. When a startup unleashes their idea to the world, it’s essential that they have all of their ducks in a row. Fintech companies are held to a pretty high standard, and investors expect a minimum level of corporate professionalism.


There is nothing that can damage the reputation of a new company more than incomplete branding. If a startup is ready to present their idea at Finovate, they’d better have a professional looking website up. Their marketing material must be in order. If a company doesn’t look prepared, it’s hard to have faith in their ability to implement a concept.

8. Setting Unrealistic Sales Targets

Pre-market is an exciting time for any startup. At this point, the opportunities are endless. Investors are banking on what a company can do, not what they have done. But it’s important to think well beyond the first few rounds of financing. Massive sales targets in the first year or two will definitely attract attention. It may even help raise additional funds. But if these goals aren’t realistic, it can sink a company.


Exceeding modest targets will always look better than failing to meet optimistic ones. Even if a company does meet its goals, investors are going to expect that moving forward. Starting with a small and attainable goal paves the way for continued successes over the year, instead of one large failure.

9. Poor Corporate Culture

Working for a startup is exciting. Many young professionals crave that environment. From a career perspective, being a part of something new and revolutionary can be a huge step forward. But it’s important for Fintech startups to understand the value of intellectual capital. Creating an environment where employees want to work will pay off in the future.


Incredible ideas can fall on their face because the people building them are uninspired. A team that believes in what they’re doing will blow away a team that’s just looking for a paycheck, and the only way to attract the right people is with a good corporate culture.

10. Competing on Cost

It’s important for businesses to consider price elasticity to their solution before they go to market. There are a number of products that we are fairly inelastic towards. If butter is too expensive, we’ll just buy margarine. If you can’t afford the iPhone, you might just buy an Android. On paper, it seems like financial services would also be fairly inelastic. But once all of the other costs are factored in, many plans fall apart.

Payment service providers are the best example of this problem. If they can process a transaction for less than the competition, it might seem like they’re a shoe in. But once you consider the fact that it would cost companies a ton of money to change providers, switch their customers over to a new platform, it’s clearly a poor deal.

Scale and market penetration are very real threats to financial efficiency. For most Fintech startups, the only way to be competitive is to truly be the best solution on the market.

A Competitive Edge

On paper, it might seem like these issues mean that Fintech companies still have a tough road ahead. In fact, quite the opposite is true. Several years ago, most startups were heading into uncharted territory. Today, many have succeeded and many have failed. This paints a pretty good picture of today’s financial marketplace. To be successful, startups will have to learn from the mistakes of failed businesses. But by the same token, this also means that there are opportunities to follow in the footsteps of industry leaders.