4 common mistakes fintechs make (and how to avoid them)

as the leading industry for VC investment last year, the fintech market will continue to attract new entrants, fuel growth-stage companies and force incumbents to adapt. Many fintech companies are pursuing similar goals: disrupting age-old financial practices.

After investing in startups in my previous role and building a fintech company over the past decade, I’ve noticed a pattern of common mistakes and missteps that are common among new entrants to the industry, as well as sometimes mature companies. To avoid business viability and growth, leaders should be aware of these common pitfalls and mistakes during the early days and growth phase of a fintech company:

Mistake #1: Great UI does not equal great service

Sustainable fintech companies offer much more than a digital interface. Product design and UX are only one – albeit important – piece of the puzzle that shapes your company’s value proposition, but the overall customer experience depends on a much wider range of factors.

How quickly can customers switch and access money? How predictable and stable are your services? How do you take risks? compliance introducing friction into your customer journey? Do customers have access to live support when they need it? Is customer data and money safe and secure? How well your business does on these fronts affects customer satisfaction far more than your app’s frontend design.

This is a common pitfall because the past few years have been stressful digital transformation and as technology leaders, we tend to prioritize it. But in fintech, and especially digital banking, the stakes are too high to overlook the critical infrastructure that is at the heart of your offering.

Remember: banks are Services, no apps. So to compete with the incumbent banks and the leading neo-banks with these comprehensive risk, service, security and compliance capabilities, fintechs need robust practices to be developed in the very early days of a company – sooner than many founders think.

A reliable, safe and reliable banking experience surpasses everything else and can make or break your business. After all, if fraudsters are hacking into your users’ accounts and stealing money, who really care how easy it was to switch between features?

Mistake #2: Settle for incremental improvement instead of disruption

Many fintechs inadvertently build with a rear-view mirror. Rather than keep making your product or experience better than Chase or Wells Fargo’s, consider the opportunity to change the way people interact with and benefit from financial services.

Think of the iPhone: it replaced the standard phone keyboard with a touch screen and added multimedia capabilities to completely redefine what a phone means. Compare that to the Nokias and Blackberries of the world that made incremental improvements to flip phones at the time, and it’s easy to see how Apple has managed to redefine this category.

Building a solution that simplifies a task step by step, or embedding financial services into an existing app, won’t lead to major changes for users or the market. Fintech needs companies to redefine finance.

For example, Klarna and Affirm have redesigned and defined point-of-sale financing with buy-now-pay-later (BNPL). BNPL offers consumers a whole new way of thinking about financing purchases (installment loans as opposed to installment credit with traditional credit cards). BNPL also allows merchants to incentivize specific product purchases with interest-free financing (which the merchant can subsidize), something previously unavailable.

This innovation is also welcome in other financial areas. For example, banks are extremely conservative when it comes to offering lines of credit for small businesses, as monitoring can become operationally taxing for the bank and thus less attractive to smaller, less lucrative lines. When we developed BlueVine’s credit offering, we restructured it to essentially be a series of term loans with a top-up limit – combining the control and operational simplicity of a closed-end product with the availability of an open-end product. This approach has helped us make lines of credit more accessible to small businesses.

It’s easy to anchor your product in what others are doing or to pursue incremental innovation. Looking at the swaths of neobanks emerging, many look the same. Disruptive innovation will always be a challenge, and the players who dare to completely redefine the $800 billion banking market are the ones who will succeed in the same way Apple did with consumer technology. Those who are limited to beating incumbents will either spin or disappear.

Mistake #3: Building redundant functions instead of adding value

To provide value for your segment, you need to be mindful of your job and focus on doing it right. While the number of your positions will continue to grow, success is rarely measured by quantity. Remember: quality beats quantity any day of the week.

Unfortunately, I’ve seen fintechs focus on pure feature speed or build things that just look “cool” instead of thinking critically about their customers’ needs and how they can add value to their everyday lives. Some fintechs have a large number of third-party integrations for their users, but in reality many of these third-party services are rarely used by their target segment. This kind of window dressing is a misallocation of resources that could be better spent on improving and iterating on your core offering.

Another example: many consumers do not want or need advanced financial visualization tools, such as cash flow forecasting. But we keep seeing these strange features in banking apps because, again, they look cool (or sound good to investors). But backend functionality, such as fast money transfers, should be prioritized instead.

This is not to say that I am against adding features where necessary. But in doing so, fintechs need to ask two key questions when deciding which features, third-party integrations, or products to add to an offering:

1. How does the incremental addition to your platform create more value for your offering (instead of just being a supermarket)?
2. Do your customers really care?

Functionalities should be purposeful, thoughtful and driven by customer needs or feedback. People will find a way to access the services they need, whether it’s within your platform or living elsewhere. There are needs in the market and there are so many tasks that need to be done, so ask yourself if a particular functionality is your company’s job.

Mistake #4: Neglecting Live Support in Favor of Technology

Digital finance does not mean 100% self-service. Of course, the model needs to work and provide efficiency by being digitally native, but there are many areas – banking is one of them – where live support is vital. Over-reliance on AI-powered chatbots, voice assistants, or online self-service resources is not only poorly received by current users, but also disservices the growth of your business.

This goes back to the idea of ​​understanding that your offering is more than a product – it’s great to have an information center for common questions or troubleshooting, for example, but relying solely on that plus email support is a major shortcoming. Robust customer support services require a variety of contact options – email, phone, SMS, in-app chat support – and, most importantly, reliable human support. Never needed, always there should be what you optimize for and ultimately what customers value.

Admittedly, building out just that first support service is an investment that many young companies don’t consider in a timely manner. Building, training, and operationalizing a 100-person support team is no small feat, and unfortunately many fintechs skip it at the expense of user experience.

With so much ahead for fintechs of all types this year, consider some of these potential opportunities to change how you prioritize some areas of your business this year.

The market is becoming increasingly crowded and underlying technology, robust capabilities and products will be the factors driving companies forward.

Eyal Lifshitz is CEO and co-founder of BlueVine.