My company’s API supplies financial data aggregation. Since this a common component for many FinTech applications, I often talk with new entrants just as they are beginning their discovery process.
Many times it’s clear after a short conversation they are drastically underestimating the required resources, timeframes, and budgets. I’ve had people tell me they expect to develop a complete budgeting module in 1-2 weeks.
Financial technology has plenty of unique challenges that aren’t always apparent when starting out. So my question is what are some of the biggest challenges for new companies just entering the space that they might not realize?
– Dexter Weatherly (Financial Apps)
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Repeatedly, we hear that startups fail to fully grasp the regulatory/compliance implications of what they are trying to do. This is especially the case when either money transfer or global jurisdictions are involved. Dwolla’s recently settlement with the CFPB is a good example of this. Dwolla’s penalty (http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-dwolla-for-misrepresenting-data-security-practices/) was a function of its practices earlier in its life as a startup. Interestingly, in our new INV accelerator it is this topic that we are having trouble finding a mentor to address and to me that is because it is just so challenging to approach fintech with great creativity while still maintaining regulatory/compliance discipline.
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i agree with the answer on regulatory compliance. The other one, perhaps even more daunting, is the difficulty of selling to banks. Establishing credibility, building a bank-centric business case, demonstrating knowledge of integration, operations, compliance challenges, navigating the organization, understanding the bank purchasing process, etc.
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