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The ongoing pandemic crisis has all but accelerated the digitization of financial services. Fintech, the popular term that describes emerging technologies that are changing the status quo of conventional banking, is catching the attention of entrepreneurs and startup founders worldwide.
After all, it is hard to ignore the potential of the fintech industry, which is predicted to reach 188 billion euros in 2024. In this article, we’ll show you some of the best fintech startup ideas that’ll get you into this lucrative and exciting industry, particularly in the EU region.
Fintech Startup Market
The latest revolution in financial services was spurred by Covid-19 restrictions and changing economic landscape. Changing consumer behavior and modern technologies create surging demand for fintech services in markets beyond financial institutions' conventional footprint.
Consumers are looking for faster and safer ways to conduct financial transactions, pay bills, manage investments, and more with the aid of technologies. This led to fintech disruptions in every financial services section, including personal finance, insurance, and capital markets. Amongst the economic spectrum, 80% of the global fintech revenue is generated from the digital payment sector.
At present, the Americas and APAC regions have the largest market share of the fintech industry. This is followed by the EMEA region, which stands for 20% of the total market share. Meanwhile, revenue growth is projected at 11.7% CAGR from 2017 to 2022. The forecast is supported by the agility and innovations brought by fintech startups, which continue to attract interest from banking institutions and investors.
Investments in fintech startups
The prospect of backing the next unicorn has made fintech startups attractive to venture capitalists and private investors. In 2021, investment value in fintech companies reached a staggering USD 210.1 billion, albeit a slight drop in the year prior. This marks a continuation in investors’ appetite that saw $213.8 billion pumped into the fintech market in 2019.
Investors are primarily interested in fintech startups with involvement in payment services, cybersecurity, insurtech, and sustainability, although cryptocurrencies and blockchain are picking up pace. Generate, a fintech company providing financial solutions to sustainability project developers has recently raised $2 billion in corporate equity.
Top 6 Ideas for Fintech Startups
These are some of the most in-demand fintech startup ideas.
NeoBanks are banks that exist solely in the digital domain and have no physical presence. Instead of queueing at physical banks, consumers use neobanking apps to conduct financial transactions. Neobanking services are typically limited to basic savings and checking accounts.
The neobanking industry is worth $47.39 billion in 2021 and is predicted to reach the $2 trillion mark by 2030.
Simple, GoBank, Moven, Chime, Varobank, Revolut, and Current are some of the prominent neo banking services. Chime, one of the fastest-growing US-fintech startups, has raised over $2.3 billion since its inception. Digital banking app, Moven, secured $23 million in Series C funding in 2018.
- Neobanks solely operates online and does not have bank charters.
- Consumers enjoy lower fees and higher deposit interests due to neobanking’s lower operational costs.
- Neobanking allows banking on the go, where consumers use mobile apps to make payments or transfer funds.
- Neobanks are available 24/7 and do not adhere to conventional banking operation hours.
- Consumers have access to personalized customer service, thanks to AI-driven technologies.
Founders who are considering neobanking services must comply with several regulations.
- Know Your Customer regulations, which require banking service providers to verify the identification of the account holders.
- Online security and anti-fraud laws are mandatory to safeguard banking integrity and the interests of consumers.
- Mobile app security. NeoBanks are required to provide adequate security measures for their banking apps.
- Data privacy laws. NeoBanks must comply with regulations like GPDR and CCPA to prevent misuse, exposure, and breaches of customer information.
- Specific open banking initiatives allow neobanks to access financial data from local financial institutions.
Neobanking apps are based on these technologies.
- Artificial intelligence to facilitate smart and fast decision making and fraud prevention.
- Automation allows seamless processing, fund transfer, and reporting on the app.
- Cloud services, enabling end-to-end financial services to run on the digital domain.
- Quantum computing and blockchain provide good financial governance and integrity with cryptography.
These are several business models on which you can build a neobanking service.
- Interchange led -The neobank generates revenue from collecting interchange fees.
- Credit led - In this model, credit cards provide the primary revenue stream of the neobank, usually in interest and interchange fees.
- Ecosystem led - Geobanks integrate with 3rd party financial services, such as international remittance, insurance, and accountings, to build a comprehensive marketplace.
- Asset-led - Geobanks focus on offering deposits and savings accounts with attractive interest rates and making money from them.
- Product-extension - A business model where neobanks diversify horizontally into related financial services for their existing customer base.
Investments and Savings
Fintech has introduced apps that allow consumers to access the trade market and make smarter investment decisions online. These apps feature analytics tools, real-time integration with stock exchanges, and wealth management facilities for public and professional investors.
Notable fintech apps in this category are Betterment, Invstr, Acorns, Wealthfront, Wealthbase, and Robinhood.
- A low or zero balance for signing up for an account reduces the barrier of entry for new customers.
- Access to major stock markets worldwide and cryptocurrencies from any internet-connected device.
- AI-based recommendations in saving and trading portfolios that help users make smarter decisions.
- Virtual trading accounts for beginners for learning and experiment with the platform.
- 24/7 access to funds and community built around the app.
If you have an investment app idea in the pipeline, you’ll need to comply with the following regulations.
- Laws and regulations specified by the SEC.
- Know Your Customer regulations to ensure that all users are appropriately validated.
- Data privacy law prevents breach, unintentional exposure, and misuse of personal information.
- Open Banking Initiatives focus on the security posture of the mobile app. This involves the integration of anti-fraud and digital security systems.
Building an investment app involves using various APIs to facilitate transaction and information flow between different financial services. This includes:
- Plaid API For Bank Account Connection Paybook
- API For Financial Data Xignite
- API For Market Data Feed
- Yahoo Finance API For Stock
- Currencylayer API For Currency Conversion
Investment fintech startups can generate revenue from several models.
- Interest - The platform charges interest on uninvested funds, which might be unpopular with investors.
- Premium subscription - Investors pay a recurring fee to access premium investment features, such as margin, selected stocks, and remove trading limits.
- Trading fees - The service provider charges a small percentage of the amount traded for every transaction.
Digital payment apps allow users to transfer money to friends, family, and retailers without physical cash transactions. Most fintech startups are keen on hopping into this seemingly saturated market, but one that continues to receive increasing demand. According to Fortune Business Insights, global transactions from digital payment will amount to USD 19.89 trillion in 2026.
Most consumers will recognize these popular digital payment apps – PayPal, Google Pay, Apple Pay, AliPay, Samsung Pay, and WeChat Pay.
- Send and receive money in different currencies.
- QR code integration to facilitate payment by scanning the payment details.
- Pay bills to 3rd party service providers.
- Allows users to restructure single-amount purchases as multiple installments.
- Seamless integration with bank accounts and credit/debit cards.
- Connect Virtual cards to digital payment apps
Startups offering digital payment services must abide by
- PCI DSS for protectionary measures involving credit card transactions and fraud prevention.
- Laws and regulations stipulated by central banks in the respective countries.
- Know Your Customer regulations to ensure every user is properly identified and authenticated.
- Data protection laws such as GDPR to ensure user data integrity.
- Cybersecurity guidelines and regulations to protect users from malicious actors during transactions.
Developing digital payment apps involves the following technologies.
- Artificial intelligence to understand consumer behavior and deliver a personalized app experience.
- Distributed ledger technology to increase security and lower transaction costs.
- Peer-to-peer (P2P) payment framework allows users to send money to each other without transaction fees.
- Automation tools that enable seamless backend integration with banks and retailers.
- Cloud computing for 24/7 access to payment facilities, funds, and transfers.
Digital payment providers use the pay-per-use model. On the payment app, they charge a fee percentage for every transaction, including deposits, withdrawals, payments, and currency exchange.
Digital lending apps bring the convenience of securing financing without going through manual paperwork, long approval times, and other red tapes. Consumers submit their applications online, get their documents automatically verified, secure approval and receive the required funds immediately. The digital lending industry is predicted to be worth $20.31 billion by 2027.
Startups like GetVantage, Planswell, Nude, Mansa, Jenfi, and Credify have entered the fintech lending space with hopeful ideals. They might follow the success of eventual unicorns, namely Avant, Blend, and Cross River Bank.
- A robust interface that works reliably amidst heavy usage.
- Security protection across end-to-end loan processing stages against cross-site scripting, SQL injection, and other malicious threats.
- AI-based document verification and background check for immediate approval.
- Recommendation on optimum loan rates and amounts to borrowers.
- Schedule loan repayment from the same app.
Digital loan providers are subjected to strict regulations that include:
- Know Your Customer rules to properly vet every borrower.
- Personal data protection laws and guidelines, such as GDPR and CCPA, for governance and integrity of personal data.
- Local tax regulations, such as Foreign Account Tax Compliance Act, which require reporting as per stipulated guidelines.
- Banking laws applicable in the residential jurisdiction of the borrowers.
These technologies are pivotal in developing digital loan apps.
- Machine learning and big data analytics allow the lending app to acquire, store, manage and process large amounts of data.
- Artificial intelligence (AI) enables the data to cross-check personal information, credit score, and financial documents against various records sources.
- API to connect the lending app with external services, such as credit verification.
- Application portal allows existing banking and loan institutions to serve customers in new marketplaces.
There are several frameworks that you can model your digital lending platform.
- Discovery and lead generation - The platform provides a comparison of loan rates offered by lenders and earns revenue through conversions.
- Pre-filtered lead platforms - Applicants are thoroughly vetted, increasing their chances of securing the loan from the lenders.
- Credit Platforms - These service providers offer credit improvement services and build long-term relationships between users and lenders.
- Online Lending marketplaces - An end-to-end service that includes lead generation, loan application, credit assessments, and integration with the lender’s infrastructure.
- Online lender - Fintech startups that fund the loan, on top of the marketing, pre-qualification, and credit assessment activities.
Marketplace banking involves creating an online ecosystem that houses various financial services relevant to the target consumers. For example, the app provides digital payment, savings, insurance, loan offers, and investment options. Some marketplaces extend their offerings with non-financial services, such as ride-hailing, food delivery, and social messaging.
WeChat is one of the leading examples of such fintech startup ideas. It started as a social messaging app and grew into a leading e-wallet in APAC. Other notable mentions include Monzo, Starling, and Revolut.
- Send P2P payments to recipients with the same app.
- Provide credit facilities, such as overdraft and personal loans.
- Offers saving accounts with or without interest rate.
- Allows users to send and receive in different currencies.
- Provide users with finance analytics and tools to track and manage expenses.
Operating a banking marketplace requires compliance with the appropriate laws.
- KYC makes personal identity verification mandatory for all users.
- Financial regulations and guidelines stipulated by central banks.
- Data privacy acts to ensure personal information is safeguarded at all times.
- PCI DSS to protect cardholders' data and provide secure encryption.
- Lending/loan regulations to ensure non-discriminatory transparency and fair practices.
These are the common tech stacks for developing marketplace banking apps.
- Microservices architecture to connect services from between app components and external vendors.
- Data analytics uses machine learning and artificial intelligence to provide a personalized app experience.
- Security components to protect users against online threats, data leakage, and fraudulent transactions.
- Open banking API for secure retrieval of personal data from established financial institutions.
- Authentication and authorization modules to ensure the rightful owner is initiating the transactions.
Popular banking marketplaces are built around these models.
- Life moments orchestrator - The platform provides financial products relevant to key moments in life, such as buying cars and houses.
- Marketplace orchestrators - The provider sells non-financial products to its existing users.
- Third-party ecosystem involvement - Besides marketing to its customers, the provider offers its range of products in third-party ecosystems.
- Open banking platform - A collaboration that lets banking partners introduce their products and services on the platform.
DeFi, or decentralized finance, describes financial services operating on blockchain technologies and stablecoins, usually Ethereum. It removes the role of traditional banking institutions and allows users fair and open access to alternative monetary instruments. With current trends, the DeFi industry might hit a valuation of $800 billion in 2022.
Starly, Chainlink, and PancakeSwap are popular startups in the DeFi niche.
- Anyone can create a DeFi wallet without prior applications.
- Users can remain anonymous as they don’t need to provide email, name, and other personable information.
- Fund transfer can occur immediately, without prior permission from a 3rd party, and without charges.
- Fully transparent transactions for every party involved.
Due to its decentralized nature, questions remain on how the DeFi industry shall be regulated. Financial experts stressed the importance of the DeFi market complying with existing financial, trading, and data protection laws. After all, both DeFi and conventional markets share commonalities in terms of financial activities.
A DeFi app is built on these technologies:
- Smart contracts stored on the blockchain that run when certain conditions are met.
- Blockchain API that connects the application with blockchain nodes or other DeFi networks.
There are several models to structure your DeFi app.
- Traditional financial transactions - Allows payments, insurance, trading, and lending on a decentralized blockchain network.
- Decentralized exchange - Buy, sell, send and exchange cryptocurrencies.
- E-wallets - Dedicated digital wallets that store cryptos and operate independently from major crypto exchanges.
- Yield harvesting - Allows investors to lend cryptos they own and generate earnings from doing so.
Why Uptech is the best choice to pursue fintech startup ideas
Uptech brings a wealth of experience and technical capability in building fintech solutions for startups. Our team works closely with founders to understand their business goals, target audience and develop a well-aligned solution. We work with agile principles that continuously get feedback and refine the app.
Our app development methodologies and deep knowledge in the fintech industry have helped startup owners with successful launches. One notable example is Aspiration, a digital banking app by a US-based startup that allows users to transact online without fees and contribute to charitable causes.
Our team consists of software experts in multiple disciplines and is adept at choosing the right tech stack to build fintech solutions. We are aware of security and privacy concerns and the need to deliver an intuitive interface for the users. Equally important is the affordable cost of developing your ideas with Uptech and getting top-quality deliverables.
Talk to our team and start building your fintech ideas.