Building a fintech company used to be a complex and resource-intensive process, from architecting a secure and scalable system to navigating regulatory requirements. However, the rise of Banking-as-a-Service (BaaS) tools has changed the game. These tools make it easier for founders to launch new fintech companies or for existing businesses to seamlessly add financial services like loans, cards, and account management into their products. By simplifying development, reducing product complexity, and easing regulatory challenges, BaaS is helping businesses focus more on creating great user experiences.

While BaaS has helped founders build innovative products and removed many technical and regulatory hurdles, building a successful fintech business takes more than just software. Founders need to know about product-market fit, revenue models, customer acquisition, and other key factors. This guide walks you through essential steps and best practices for building a thriving fintech business.

Before we explore the key considerations for building a fintech business, let’s first cover the fundamentals and core components of a fintech business.

How Fintech Businesses Work

A company can be categorized as a fintech if it offers financial services such as accounts, loans, and cards through digital platforms (web, mobile, or both), enabling customers to access these services online. This can take the form of a fully fintech-focused business model, where the primary offering is financial services (e.g., a company specializing in loans for small businesses). Alternatively, it could involve a business integrating financial tools into its core offering (e.g., an e-commerce app that also helps business owners process payments and manage spending with a virtual card limit).
With so many companies now offering financial services, it’s not always clear what qualifies as a fintech anymore. The line between fintech companies and traditional businesses is becoming blurry every day. Generally, financial services can be offered through any of the following means:

1. Direct-to-Consumer Platforms: These are apps or websites that offer financial services directly to individuals or businesses. For example, an investment platform like Piggyvest offers customers investment opportunities.

2. Embedded Finance: These are companies whose primary services are non-financial but integrate financial services into their platform. For example, a ride-hailing app like Uber offering drivers instant payouts or a marketplace providing buy now pay later (BNPL) options for high-end products.

3. Financial API Services: These companies offer financial tools to developers so they can integrate them into their products. For example, Flutterwave provides payment and data-sharing APIs that any developer can leverage in their applications.

4. Partnership Model: This involves collaborating with banks or financial institutions to deliver services under a joint partnership. For example, a retail business can issue branded credit and debit cards powered by a bank.

5. Decentralized Finance (DeFi): This is a new way of banking and offering financial services by leveraging blockchain technology. It lets users perform financial transactions without the need for intermediaries, such as banks or other financial regulators. Examples of DeFi include cryptocurrency lending platforms and decentralized exchanges that use a fintech payout solution to process payment.

Irrespective of the business model adopted—whether a fully fintech-focused model or businesses integrating financial tools—fintech relies on various components to process financial transactions. These components include:

• Payment Gateway: Acts as the bridge between merchants and financial institutions, enabling secure communications and authorizations of transactions.

• Payment Processor: Manages the transaction flow between the customer’s and merchant’s banks, ensuring funds are transferred securely and accurately.

• Merchant Account: A special account, typically provided by payment processors, that enables businesses to accept and manage electronic payments from customers.

• Security and Compliance Layer: Maintains data privacy, know your customer (KYC),  fraud prevention, and adherence to regulatory requirements such as PCI DSS or GDPR.

• User Interface Layer: Provides the front-end experience where customers interact with the payment system, delivering a smooth and intuitive process for making payments.

• Backend Services: Handles business logic, transaction monitoring, reporting, and integrations with other systems such as CRMs or accounting tools.

Key Points to Consider When Building Your Fintech Application

As a founder building a fintech product or planning to integrate one into your product line, scaling requires careful attention to several factors. Below are some key considerations:

1. Product-Market Fit 

Product-market fit refers to the point where a product satisfies a strong market demand, meaning it effectively solves a real problem for a well-defined group of users. A common issue with traditional banks and financial institutions is that they create products for a wide audience instead of focusing on specific groups of people. Successful fintech companies, however, build products that solve real problems for a specific set of users. Without solving a clear problem, even the best technology or design won’t make a product succeed.
Here are some key steps to help you choose the right product to build:

• Understand Customer Problems: Chime noticed that traditional banks often charged hidden fees and had poorly designed mobile apps. They tackled these issues by offering a free banking experience with a simple, user-friendly app. You can follow this approach by identifying your prospective customers’ biggest pain points and building a product that directly solves them.
• Start Small with an MVP: Just like Revolut started as a simple app for exchanging currencies and later added more services based on customer feedback, you can build a basic version of your product, called a minimum viable product (MVP), to see if people are interested and to gather feedback.

If you don’t take the time to understand customer problems or test your ideas early, you risk targeting too many people at once. This can waste time and money while making your product less valuable to your audience.

2. Monetization Strategies

Having a great product is essential, but you also need a clear plan to make your business profitable. Depending on the type of fintech business you’re building, here are some common strategies you can use to generate revenue:

• Transaction Fees: If your business provides services like card payments, you can earn a percentage from each transaction. This is profitable for platforms that handle high volumes of transactions.
• Lending: Offer loans to your customers and make money through origination fees and interest rates.
• Subscription Models: Charge customers a recurring fee for subscriptions or memberships that give them access to your services.
• Fees on Locked Funds: Provide a service that allows users to lock funds for a set period. You can then charge a fee if they withdraw the funds before the lock period ends.

You can use one or combine multiple strategies to diversify your income and improve profitability. However, always keep an eye on competitor pricing to stay competitive and avoid overcharging your customers.

3. Customer Acquisition and Retention

While a deep understanding of your customers helps you build the product they want, it is not always enough, as the fintech space is competitive. You need to implement tactics that’ll help attract more customers and retain them. Here are some common tactics you can use:

• Incentives: Offer sign-up bonuses, discounts, and referral rewards to draw in new customers.
• Exceptional Customer Experience: Provide features like 24/7 customer support, gamification, and self-service tools to build a loyal user base.
• Educational Content: Share valuable content, such as articles and videos, to engage your audience, build trust, and strengthen customer relationships.

4. Determine Infrastructure and Technology to Adopt

Thanks to Banking-as-a-Service (BaaS), fintech companies don’t need to own or build their financial infrastructure from scratch. BaaS providers act as intermediaries between fintech businesses and banks, offering the infrastructure needed to quickly and easily build financial products.

As a fintech business, you have two main options on which you can build your fintech infrastructure:

• Partner Directly with a Bank: This approach involves managing the relationship with your banking partner, building core systems for money storage and movement, handling compliance, and meeting regulatory requirements.
• Use a BaaS Provider: BaaS providers offer ready-to-use financial infrastructure that simplifies product development and compliance. While this reduces complexity, it often allows for less customization.

In addition to infrastructure, you’ll also need to build other essential components, such as user management, dashboards, and more. It’s crucial to choose technology that supports growth without compromising performance or user experience. Key considerations include:

• Cloud Platforms: Services like AWS, Azure, or Google Cloud allow you to scale quickly and efficiently.
• Automation: Automating processes like customer onboarding or fraud detection reduces manual work and helps you scale without increasing overhead.

5. Compliance and Security

Fintech is a highly regulated industry with serious consequences, such as lawsuits, fines, or even shutdowns, if operational rules are not followed. To successfully operate a fintech business, you need to focus on the following key areas:

• Licensing Requirements: If you plan to operate in multiple countries, ensure you meet the regulatory requirements of each region and obtain the necessary licenses.
• Data Security: Adopt secure practices such as encryption and multi-factor authentication to protect customer data during transactions.
• Anti-Money Laundering(AML) and KYC: Implement AML and KYC checks to prevent fraud, ensure compliance, and avoid penalties.

Note that navigating regulations can be both costly and time-consuming, especially for startups. The validation and compliance processes may slow product development, so you must plan accordingly and allocate resources to meet these challenges.

6. Continuously Test and Iterate

When it comes to customers, think of it as a marathon, not a sprint. Their needs and pain points will evolve over time, and you must be ready to adapt accordingly. To stay in tune with your customers, consider the following:

• Engage Regularly: Continuously engage with your customers to understand how they’re using your product, the challenges they face, and any new needs that arise.
• Identify Pain Points: Gather feedback by observing user behavior and listening to their concerns. This will help you identify areas for improvement or new opportunities.
• Dedicated Support: Assign a dedicated Account Manager or Customer Success Officer, whom customers can easily reach out to when they encounter any challenges.

By maintaining this ongoing feedback loop, you can ensure your product remains relevant, solves real problems, and keeps customers satisfied.

Get Started on Building a Scalable Fintech Solution

Flutterwave offers solutions that tackle many challenges companies face when building and scaling financial products. Our Payment-as-a-Service (PaaS) APIs and tools make it easy to create new fintech solutions or embed financial services into your existing offerings. Here’s how we can help:

• Flutterwave Checkout: A customizable checkout experience your business can tailor to match its brand. It supports multiple payment methods, including cards, mobile money, wallets, and bank transfers.

• Flutterwave APIs: A range of APIs that integrate seamlessly into existing systems, enabling businesses to accept payments, manage transactions, and build innovative fintech solutions. Whether you’re processing online payments, handling payouts, or scaling financial services, Flutterwave’s APIs provide the flexibility and reliability needed to power your operations

• Flutterwave Verification: A tool for verifying the integrity and security of transactions, performing KYC checks, and validating bank details through automated processes.

• Flutterwave Subscription: This enables your business to automate recurring billing and payments for subscription-based services. It supports multiple currencies and payment methods, making it easy to manage recurring payments.

• Flutterwave Virtual Accounts: A service that lets you create unique virtual accounts for customers, making it easy to collect payments, track transactions, and send payouts. It supports multiple currencies and automates payment processing to simplify financial operations.

By handling infrastructure, compliance, and security, Flutterwave lets you focus on creating value for your customers. Whether it’s building trust, simplifying payments, or scaling effortlessly, Flutterwave equips you with the tools to delight your customers and grow your business.

Get started with Flutterwave today.