In this second part of the guide, the focus for founders & early-stage teams shifts towards building out the minimum viable product (MVP). Based on the MVP, this may include integration with a Banking-as-a-Service (BaaS) provider. The other key area we covered in-depth is app development. We’re saving fintech marketing and growth for our third (and final) part of this FinTech guide for founders & early stage teams.

the lens for new founders in EVALUATING BaaS Providers

If an MVP involves holding user funds, issuing a card, or complex payment flows, the chances are high that partnering with a BaaS firm may be best.

The value from BaaS: faster launch time + lower fixed cost (since there’s no need to build out the tech infrastructure, become licensed, or do a custom build on top of a bank), streamlined operations (not having to juggle various players into a single program), AND revenue share on transaction activity.

Non-BaaS options through 3rd parties involve multiple vendors (core banking, compliance, card printers, payment processors, etc.) and increased program management obligations. These types of fragmented programs tend to have multiple points of potential failure, which impact the longevity of a platform.

Here are 5 critical Banking-as-a-Service criteria for new (and existing teams) to consider:

• Value creation: be clear about the problems addressed by a BaaS vendor/partner; this comes down to connecting what you’re trying to accomplish to services available. Beyond high-level value mentioned above, BaaS partners help boost user engagement (i.e. create ‘stick customers’ that transact more) and deliver new products for platforms (such as credit, crypto, savings) via existing tech integrations;

• Services needed: After figuring out value, it’s best to uncover what available products & services will get your platform there. Since not all providers offer the same functionality (or the same approach), it’s important to dive deep here. Taking this a step further, understanding how long a product/service has been offered and how many other platforms currently utilize it also deserves clarification;

• Licensing: based on the region your users reside AND program offered, licensing/registrations may be needed. Money transmission, custody of user funds, registered securities & private placements — typically require government oversight. It’s best to seek a legal opinion early regarding use case & business model in order to avoid operating concerns down the road. Most BaaS companies don’t have licenses in the US (not the case in UK) — with 3rd party licensing dependencies, risk scope and comfort level may change abruptly based on market & regulatory conditions.

• Compliance obligations: when it comes to anti-money laundering (AML) and user onboarding, BaaS providers (and bank partners) may push these responsibilities to fintech platforms by pointing them towards an approved vendor list. This is common for newer BaaS players in this space. Founders should plan to have their own platform-specific policies in screening for quality users and deterring fraud.

• Technical: (the tech in FinTech), this section can easily its own deep dive — here’s a high-level of what’s most important:

  • RESTful APIs: Application programming interfaces (APIs) help standardize data exchange in modern apps and websites; REST APIs have become a common version for financial apps since it allows web services to be built & function via HTTP. Building from this format makes it easier for tech teams to customize programs quickly & often;

  • Layered services: Overlapping with the previous section, various vendors and processors are required to launch a financial product. BaaS solutions become stronger options when multiple components are available (such as onboarding, Know Your Customer, transaction monitoring, user disclosures & agreements, etc.);

  • One single platform: Taking it one step further, layered service through a single platform or dashboard is the ultimate goal when it comes to tech capabilities from BaaS. Not having to string together a fragmented set of vendor dependencies means less integration and less program management issues;

  • API docs & sandbox access: BaaS firms should openly flex their tech muscle via detailed, open documentation. Walkthroughs of user onboarding and account opening flows, citing specific APIs, and allowing testing via a sandbox should be the standard. Undergoing sales calls or other gatekeeping tactics before gaining access to these materials is a red flag;

Besides the above list of BaaS-specific items, general diligence on roadmap (i.e. products in development to be released soon), pricing structure that aligns with your MVP & business model, and customer references (e.g. feedback from existing platforms) also deserves attention. We’ve gone into more details (for companies of all sizes evaluating providers) as an open checklist here.

fintech App Development for early stage teams

Modern tech integrations, user interfaces, and security controls all roll under the umbrella of fintech application development. Multiple firms offer convenient & secure software solutions that take users through an onboarding journey and expand what’s possible in a banking app — allowing for payments, purchases, investments, and lending.

Depending on the program offering, developing a fintech app can be a complex and lengthy process requiring varied levels of technical expertise along the way AND strong insights of your target market. Here are the key considerations for early-stage teams:

• Market analysis: This non-technical step will anchor all mobile app development efforts. Research and insights on market, user profiles and activity, existing programs that are competitors, and trends are essential. A one-size-fits-all app will perform poorly in today’s industry landscape. User case studies and feedback sessions help identify important painpoints and ways to differentiate yourself from the competition (which echoes the discussion in Part 1 RE: MVP). SWOT analysis (Strengths, Weakness, Opportunities, Threats) is also a helpful when it comes to strategic planning;

• Application type: Comes back to product category — a neobank will be built differently than an investment app. Even within neobanking, a teen banking platform should feel different than one targeting established content creators or one for military families. Within these categories and application types, a decision must then be made on feature set for the MVP and budget needed for the build. More intricate features and customization leads to higher spend (due to more developer hours being needed);

• Development team: For early stage teams, development is typically outsourced to an experienced agency or dev shop. These companies should have a mix of user interface (UI) designers, developers, project managers, and testers — based on their experience and estimated hours, rates and overall cost will vary. Examples include: CHI Software, Armada Labs, Blackbird Tech, HelloIconic, NakedDev, TrueNorth. UI design, in particular, plays a critical role for apps — usability, navigation, time to signup are all impactful in gaining & maintaining new customers. An app that is too cumbersome or has a high learning curve may lead to poor user adoption and overall usage;

• Security measures: Managing user funds and data requires the utmost controls and security from developers. Two-factor authentication (2FA), device fingerprints, and facial recognition are features increasing how secure an app is. Balancing security and user-friendliness is a delicate act, but ultimately the priority is user safety of finances & personal information — even established firms can fall victim to data breaches;

• Support: In-app resources for users with concerns is vital in any industry, especially in financial services. Frequently Asked Questions (FAQs), guides, buttons for submitting claims or cancelling a debit card, etc. keep users engaged with your program in a positive light. Chatbots are popular in addressing most user inquiries quickly via app. An actual support team should be included as Level 3 support, which focuses on customer escalations and complex issues.

• Testing, feedback, adjusting: Once there’s a V1 app to work off of, its time to start testing with a small group of target users and collect feedback for improvement and iteration. Review comments from users as a team and agree on the changes to be made in the next version of the app. When it comes to app development, the notion of MVP refers to a simple version of your future app that provides the most critical features addressing your user’s need. Repeat this cycle as needed to ensure a cohesive and user-focused MVP is in place before beta testing with a larger audience.

From the discussion so far, app development overall is a major decision and undertaking. Depending on what’s needed for buildout, the entire process can take 2 months or a full year. Budgeting becomes a major area of concern for early stage teams constrained by available funding. After deciding on a development team, make sure everything for your MVP is captured in the initial design and cost estimate. As work gets started, stay committed to this vision and minimize feature changes (that can cause costs to creep up).

Fintech Guide for founders & startups - Pt. 3 (Marketing, growth)

Going from product category, MVP to business model, this 2nd part focused on the build stage — choosing providers & partners to construct the actual fintech app and enable banking services. Just as important as the foundation, the program is now being structured from a proof of concept to a working MVP that can be tested and iterated towards a final version.

Once this final MVP is set, marketing efforts come into play to drive new business — users on a waitlist can be early adopters and evangelize your program to their friends & family. Multiple marketing strategies and best practices for early stage teams help convey the value, differentiation, and messaging of your platform. From here, growth efforts kick in that focus on deepening early customer relationships and scaling platforms quickly. We’ll cover these remaining topics in the final part (3) of our FinTech Guide for Founders & Startups.

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