Why Fintech startups fail? Mistakes and conclusions

27 February 2018

Fintech is developing rapidly. The financial technology sphere is currently experiencing strong growth and placement of funds, coupled with new ideas and innovations. Startups often assure to revolutionize the process that financial institutions operate, but despite the amount of thought that goes into making innovative financial technology, many traditional startups succumb to the same, avoidable issues.

Fintech startups suffer setbacks for a variety of reasons, but the ability to find out common pitfalls beforehand can allow you to better plan for success. This article discusses some of the mistakes that Fintech startups have made, from powerhouses like Uber, Tinder and Slack to fast-growing companies like Settled, Saberr and Laundrapp, and hopefully some tips on how to avoid them.

A good idea is not synonymous with success

It is surprising how many traditional startups genuinely think their product is going to change the financial landscape. Eventually, it turns out their product creates a solution to a nonexistent problem, or has even already been created by another vendor or bank’s IT department.

In this case, it is important to analyze the market and see if there is room for the idea. Do not launch a financial product without researching to see if it already exists, if it is really necessary or actually solves a problem. Analyze what traditional banks and the competition do. In addition, spend money traveling to Fintech conferences all over the world (ranging from Finovate, Money 2020 and others) rather than building a sustainable business.

A good idea is not synonymous with success

Products do not sell themselves

A single quote summarizes this mistake: “Our solution is so great it will sell itself. So we really do not have a sales strategy”.

Fintech startups dream of becoming next Venmo or Uber, but no matter how great an innovation is, it will not sell itself. Sales and marketing is never an afterthought. If there are not carefully thought out plans in place or people hired specifically trained in sales and marketing, a financial technology product will not succeed. The strategy should take into account that sales deadlines can take longer and may not coincide with the Fintech sector’s rapid development. This can be very complicated for innovative products that become obsolete in a few months.

A website that is “under construction”

To be successful and make sales, an optimized website needs to be fully constructed. Credibility is necessary to close a deal, and the information on a website can either build credibility or hinder it. Nothing looks more bush league than a startup company with a homepage that only contains the phrases “Coming soon,” or “Under construction”.

Remember, your website is your storefront. A website should include the following elements: product description, marketing materials and media materials. And if the product is not initially well-known and there is no media coverage, include links to related issues.


If your startup has some early success, it is important not to believe your own hype. The startup ecosystem has a vanity problem. Many entrepreneurs who raise money and attract the market’s attention early find themselves the object of affection before they have made their first dollar. It is only partially their fault – the Fintech ecosystem can be an echo chamber of praise for unproven ideas. This is why it is so important to stay humble. With rare exceptions, the most impactful Fintech startups were built by people who kept their head down and solved problems. Focus on building a meaningful product and business.

Not finding the right co-founder

It is a cliché, but finding the right co-founder is like finding the perfect roommate. Who also happens to be really talented, ideally in an area that compliments your skill set.

Not finding the right co-founder

There is no shortage of advice on how to pick the right co-founder out there; however, the best combination of founder teams is someone who is very technical and someone who has a flare for sales and marketing. At the end of the day, it is essential to find a co-founder you respect and can get on with and who shares a common goal.  There will obviously be arguments along the way but ultimately you want someone who can roll with the punches, take constructive criticism in their stride and be flexible enough to change approach if things need adjusting.

All too often, enthusiasm and overconfidence regarding an idea obscures the basic business fundamentals. As a result, Fintech “mountain” is littered with wreckage of startups that were not watching where they were climbing.

Therefore, study the business environment thoroughly. Seek expert advice from law companies that specialize in financial services law, regulatory work, and compliance. Seek and hire specialized team members early. Learn from these experts and include their recommendations in your business plan, your product or service offering, from the start. Never forget that specialized Fintech planning is different than mainstream business planning.

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