What is the best way to design a fintech business model that creates value and solves pain points?

Fintech services strive to provide a simplified, faster, and more cost-efficient solution to address customer pain points. Consider the past, when clients had to physically visit a bank branch to deposit a check, compared to now, where they can simply scan and deposit it using their mobile phones. Today, many fintech solutions focus on swift, secure, and economical money transfers across the globe, or even employ financial robots that can partially or fully replace human financial planners. Looking ahead, financial institutions will become increasingly streamlined and cost-effective, with fewer front-facing operations and more reliance on AI and machine learning employees for backend tasks.

The main leverage of a fintech business lies in the technology stack it owns. To comprehend the challenges faced by end users at each interaction point with fintech services is crucial. Eg, if the fintech business offers multiple services and users face significant friction while accessing these services, it becomes imperative to pinpoint the pain points of your target users. Conducting customer interviews and surveys can be a valuable approach in this regard. Analyzing the current state and designing for a future state that takes into account gaps and inefficiencies is vital. In our scenario, the future state aims to create a frictionless, seamless, single sign-on login experience for users accessing multiple services.

Launching a successful fintech venture begins with in-depth research into the existing financial system. The founding team must pinpoint areas of friction that can be resolved through a substantial 5x-10x improvement of existing technology or the development of a groundbreaking platform. Merely addressing narrow customer issues isn't sufficient, as both established financial institutions and well-funded startups can swiftly adapt. To avoid high customer acquisition costs (CAC) and churn rates, fintechs must tackle complex financial challenges. Failure to do so often leads to insurmountable obstacles.

Once a fintech identifies the complex areas for improvement within their platform or product, they must determine whether their target market comprises B2B or B2C customers. It's crucial for fintechs to craft a compelling value proposition that resonates immediately with their target audience. Additionally, the benefits must clearly communicate how customers can save or earn money by using their products or services. While enhancing the customer experience is essential, demonstrating tangible customer savings or income may take time, often necessitating the realization of economies of scale.

Numerous major fintech players in the current landscape prioritize attracting new customers at any cost, often due to their reliance on venture funding. In their early stages, their focus was not on creating revenue models conducive to long-term profitability. However, if your fintech addresses a genuine pain point for the target audience, developing a sustainable revenue model becomes evident, driven by crucial metrics such as customer acquisition costs, customer lifetime value, and competitor pricing.

A clear understanding of both functional and non-functional requirements that closely align with customer desires plays a pivotal role in developing a platform that empowers customers to effectively utilize it. Presently, many fintech companies prioritize the adoption of architecture based on cloud-centricity, API-driven microservices, and event-driven technologies and tools, all of which enhance security, and reliability, and deliver a seamless user experience.