How to 10X your Fintech StartUp profit

The common way to earn money from your fintech startup is through third parties, subscriptions, and advertising. However, many fintechs in their early stages are primarily focused on growth rather than profitability. For fintech companies, it is a game of choice between expanding scale and increasing profit. Most prominent Fintech startups are barely profitable, while the most profitable Fintech startups are barely prominent. This shows that there are different business models that are applicable to Fintech Startup 

Each model is unique to particular types of companies. Regardless of this diversity in the fintech category, every organization is expected to make profit. The revenue model is meant to define who pays, how payment is collected, and the impact on the customer. 

The challenge with fintech brands is that they are trying to expand the brand’s vision while also trying to make money, which could limit the growth of the business. As a fintech, your brand could fall into any of these categories.

7 Categories of FinTech 

These are seven common categories of fintech.

1. Budgeting, money management

2. Crowdfunding

3. Crypto

4. Insurance

5. Lending

6. Payment systems

7. Robo-advising

How Fintechs Can Make Money

Many FinTechs are making money in different ways today. Some of these strategies include:

1. Subscription/Fee: This is when money comes straight from the customer. That is, the fintech company bills the user a certain amount for the selected services for which they want monthly or yearly. Most subscription packages begin with free trials, which enable the user to have an experience of the service/product before they decide to go all in or not. It is notoriously popular amongst several fintech and other tech innovations. 
2. Transaction Fee: Also popular alongside the subscription fee is the transaction fee. This is when the product founders choose to charge a small fee or percentage on every transaction or action carried out on the platform. These fees are usually very small, less than #1,000. That is why startups have to grow to have several customers so they can multiply their earnings and make it worth it. To increase their profitability, many fintech startups adopt more than one revenue model.
3. Robo-advisors: This platform allows users to trade on the stock market without paying investment advisors. However, the platform provides recommendations to users using algorithms and machines to manage portfolios. Like investment managers, they make their money by charging a percentage of their user’s assets or portfolio. Their charges are usually lower since the system of operations has been simplified and the platform mainly uses algorithms to allocate, manage, and optimize the user’s assets.
4. Third-party partnership: Partnership with other non-financial organizations is a great way for fintechs to increase their revenue. Unlike other revenue models, it’s simpler and most lucrative. Third-party partnership is when FinTech liaises with other platforms that provide different kinds of value to their customers. Examples of third-party organizations include credit scoring tools, insurance platforms, health provider platforms, educational platforms, etc. The Fintech simply served as a portal to the third-party organizations by bringing in customers to the Fintech app to use the services of the third-party platform. The third-party platform then offers Fintech a percentage of their revenue. An example of a company rolling in money from this strategy is Coinbase. They’re a marketplace for buying and selling crypto. Thanks to their partnerships with Expedia, Dell and others, they can enable bitcoin payment functionalities with Paypal and Stripe. Only 26% of total Fintechs rely on third-party beneficiaries, but nearly 43% of the mass market solutions (the budgeting and savings tools) use this revenue stream. There’s a huge opportunity here because financial services can literally be integrated into everything: governments, universities, schools, insurers, and more. And with invisible payments soon being a thing… just imagine! 
5. Advertising: this is quite similar to third-party partnerships; however, it just involves one-time payment where brands and businesses pay Fintech companies to host their ads on their platform and promote their business. So while you earn from businesses that want to advertise on your platform, your users are also gaining value by gaining access to the software and services they’re interested in. They could also earn referral points or bonuses when they invite their friends/family to use their platform. 
6. Data: FinTechs are commonly successful because they have access to a lot of data which they utilize in modifying their services to suit their audience. Personalized services are one of the fastest ways to sell and expand your business to new categories of users. Through smart data management platforms, Fintech can assess details such as income a person is earning, favorite vendors, and how often they earn. Data is gold, and most large corporations like Google are willing to pay for users data. However, monetizing data requires a lot of careful strategizing and planning. With a clear strategy, companies can enhance their data economically, whether through upsells or cross-sells, in order to make it even more valuable. For instance, a budgeting app will have a lot of data on people’s budgeting habits; this is information that can be sold to credit scoring platforms and other platforms that need the data. 
7. API: API, also known as open source is a medium through which tech brands sell access to software or particular features to another tech platform. In Fintech, this is referred to as open banking. Through API, Fintech brands can build innovative solutions and sell this feature to other Fintech brands. For instance, Fintech A has built a smart payment tracker and then sells the codes to Fintech B. Adopting this revenue model, Fintech can earn from selling codes and licenses to other businesses. This is how Banking As A Service started. Today, banks don’t need to build their own system from scratch. By leveraging BaaS, they can purchase access to fully developed softwares with customized features, hence saving money and time on app development 

Conclusion:

FinTechs are highly profitable if you adopt the right revenue model that matches the business. Depending on the kind of Fintech service you provide, not all revenue models are going to suit your business and work for the market you intend to target. However, several fintech brands go ahead to adopt more than one of these models to enhance their profitability. You can explore till you find what exactly works for you.

Note that your Fintech might not bring in profit immediately, but with good timing and the right efforts, you’ll break even.