What Do You Need To Start a Fintech Startup?

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Upplabs
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This year UppLabs started new Fintech podcasts with industry experts. This material is devoted to our first podcast starring Roman Tazetdinov, Global Partnerships Manager at Ingenico ePayments.

Interview with Roman Tazetdinov

Roman is a hands-on strategic initiatives leader with a strong financial and technical background who has worked in fintech since 2009.

In this interview, we’ll find out why regulations are so important in the financial sector, why technology can’t guarantee your success, and what you need to start a fintech startup.


Short Intro About Roman Tazetdinov:

Roman entered the field by helping one economical company as a technical expert. This  London-based company was working with high-risk merchants to process their payments online. One of the next projects he was working on was legacy banking in Saint-Petersburg. There, Roman worked with mobile banking in Russia – starting from two payments a day he helped service to get about two million payments in a month. All the projects he was working on involved payments. Having the technological background of an IT developer, he could recognize how to cut angles in financial technology.  For example, how to quickly help the bank or understand how the merchants can benefit from different technologies, how to simplify custom banking experience, or how to manage funds.

Finally, Roman ended up with the Global Payment provider in Amsterdam.  Now he is working mostly with consumer payments, B2B and B2C payouts, and merchant services.

Below, you will find an expert opinion Roman provided on the following questions.

The Role of Fintech Technology

In general, I think the legacy base is not so improved by technology. However, technology can bring additional opportunities and it’s not usually recognized by legacy banks or even higher technology banks. If they don’t change their employees quite often and if they are not hiring a lot of people from startups, sometimes they miss a point. And this is where Fintech companies can grow quite significantly. So, there appear few ‘Fintech unicorns’ that show that they can improve technology and compete with the general banking services market, delivering significant value to customers, both in B2B and B2C verticals.

What Kind of Technology Is on Top Priority Now To Invest?

If you invest in a financial company, I would rather recommend not looking into the technology aspect, but more on the ideas that the financial companies have.

If we take an example of TransferWise, they are solving a big problem for their customers and it’s important to know the customer demands, and, as well, more compliance and legal aspects. In case you are an investing financial company, we have to always look at what kind of market they are targeting and what kind of product they deliver.

There is quite a significant demand for crossborder payments.

Because every country has its own local regulations and these regulations can be kind of a showstopper. However, Fintech companies should always consider those regulations not as showstoppers but as the potential for squeezing between those regulations and find out how to stream the money flow in a compliant way and deliver value to the customer. For instance, if you would like to send the payment from the UK to South Station country – that will be a big problem. Because if the payment is very small, you always pay Swift fees. And from this point of view, there are a couple of companies on the market who solve this problem and I think this area is currently booming.

But those startups that are already in this space, they are more creative on compliance and regulation subjects rather on technology space. So, in case you understand consumer demand and regulation corridors between different countries, then you can figure out what kind of product you need to deliver and you can use any technology to do so.

Local Fintech Regulations

If we take local regulations of countries, they are all quite similar to my point of view. Some are more restricted and some are more open. If we divide all the countries on emerging and emerging, usually emerged countries like European countries or the USA, don’t have lockers to repatriate funds from those countries or to get funds into these countries. And this is because they understand how to make money on cross border flow.

However, some emerging countries like Indonesia or Vietnam, have significant power with their people who can manufacture something. However, if you open the border, then funds that have been made by these companies, start to go out of the country, and from these perspectives, those countries put an effort to block money flow to go out of these countries. So these countries are usually considered to be more complicated than others.

In Europe, there are more advanced regulations that have no significant restrictions to stop money from going from one country to the other. So, it brings fewer opportunities for Fintech startups to compete in this market because more companies start this kind of business.

However, if you target those emerging countries, you, of course, have way bigger opportunities, but you have to find these regulatory things, which will be very complicated to go through with the money flow.

But I don’t recommend starting a business in emerging countries.

Because if you are a startup, you need to grow and such countries are in the early stage of financial regulatory development. So, if you target, for example, Indonesia, you need to have patience.

However, if you target Russia, for instance, then it should be easier, because some emerging countries provide certain relief measures on how to stop money from the outflow and when it happens, like in Korea in 2018, then on this time, they have significant growth of Fintech startups and cross-border financial operations.

But in Europe, everything is kind of clear and payments are becoming a commodity here.

What Would the Fintech Market Look Like Without Regulations?

I don’t think we would like to do so, because it can threaten the whole world. Financial regulations are in place because they are necessary to stop money laundering and so on. Otherwise, we can easily sell guns from any country to any other without any problems, and people start shooting each other.

The Top Trends in Fintech Aren’t About the Technology – Explore New Markets and Suggest Ideas

I think ideas are always the same from a global perspective. Of course, I’m not so much involved in local commodity payments and something is happening as well there, but considering the global expansion of financial technologies, as I said you can’t repatriate fund from India today, so it means that whatever global business would like to start selling in India, like retail. They have to set up a property substance in India and start local operations and it’s not always simple to do this. It requires a lot of investments.

But, let’s imagine that tomorrow India opens its borders for funds and removes withholding tax from fund repatriation flows, then it will definitely be a huge opportunity and global business will start to enter India from crossborder substances very actively.

So, from this perspective, it’s always necessary to research in advance and look for these kinds of potentials. When you research if you can do this in your business, you always have to take into consideration compliance, taxes, and the local environment, language as well.

Because in China, for example, you can’t do anything without knowing the Chinese language. These guys speak the most popular language in the world, and they are not so keen to learn English. Those are the opportunities where you can find significant growth. You can not only develop fantastic technology and then enter the Republic of Kongo because most people in Kongo don’t have bank accounts, so technology won’t help you.

In the US of course there is bigger potential, its market is more and more segmented, so one money flow can be serviced by more companies and every company delivers additional technology which brings the value to operate with that money flow in a better and easier way. Some startups are automating Invoicing or payouts. So, basically the more market has emerged, the more demand for technology there.

However, it’s very complicated to compete at those markets, and your technology should be innovative and really creative and the project and the idea behind should be the only one in the market to get significant growth.

Unlike in the emerging markets, you can easily create the financial schema and with commodity, you can get significant market share.

In general, if we touch the money, every process can be organized right, you can always find an idea.

If you are a startup, you always have to take into consideration that if you have an idea today, it means that there are 10 people in the world who have the same idea or maybe they started it yesterday, so you already are one step behind. Sometimes.

When one startup has good technology, and the other one has business development, the one that has better business development – wins this competition, despite the fact that the first one has brilliant technology and faster processing.

You always have to take care of your relationships as well as customer care (is also very important).

And I think that new startup unicorns deliver custom care services in a bit better way than legacy companies with huge corporations because their approach it differently. They have customer success departments, they get feedback, and then they talk to the product team in terms of how to improve the product. Their planning is a bit easier because you don’t need to align with all these big organizations and plan the budget. You can test many ideas very quickly and then find out what your customers like.

What Is the Biggest Challenge in Consumer Payments?

I think, in consumer payments, the main challenge is, as I have said, the crossborder, so when you, as a company, go to the retail or digital service provider or travel, you always face this crossborder. And it’s very expensive. However, if you start to do this domestically, you have to deal with local substance regulations and access, and I think this is the main showstopper of global expansion and digital companies nowadays.

The company I work in is trying to fix this issue. We deliver creative solutions to local payments’ acceptance. We are doing it in Latin America, USA Europe, and even in such exotic markets as Russia, Australia, New Zealand, Singapore. We don’t work with small clients but only with huge global merchants, and everyone is different, and we help them with our expertise, so they can enter the market as soon as it is possible and feel there like a local business operating crossborder.

Are Merchants in This Industry Speed up or Slow Down the Process?

I think they are driving this process because the client is always reaching out to the market to check how easy it is to enter the market. So, they provide their request and this is how we find out the next point of growth in the world, and then we focus on that market and deliver proper local solutions, expecting that merchants will reach in a year or two to explore that local payment collection opportunities.

‘Fintech Unicorns’ To Pay Attention To

I really like the approach of TransferWise. I think they have grown significantly for the last ten years. Also, Trustly, but they mainly focus on high risk vertical. I think the rest are doing commodity staff and trying to find new markets to grow.


Stay tuned! We have more interviews with the Fintech experts to publish!

If you need any professional advice or software development – drop us a line!

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