Finance

Profitable Revenue Models Dedicated To Fintech Businesses

No company can be successful without generating revenue, can they? Fintechs are meant to help people manage their finances and save more by investing or cutting expenses smartly. But ever wonder how these companies make money for their own ventures? 

Fintech is the use of technology to improve financial management systems. With developments in mobile apps and cloud-based solutions, it has never been easier for people to keep track of their money and make better decisions.

Fintech companies have changed how people do business and interact with the financial sector. There are many different types of fintech businesses out there. Some focus on improving how people pay, while others improve how people save and invest. Some focus on improving the way banks manage information. 

And how Fintechs make money is associated with the solution they provide. Like typical companies, Fintech companies also have enough options to generate revenue. So, stick here if you were thinking about the revenue model but could not find one for your Fintech startup.

This article will explore how Fintech companies can make money and grow with the ever-changing technology and consumer behavior. So, let us get going.

Fintech business categories

I thought it would be better to start with a clear mindset about types of Fintech and what businesses fall into the Financial + Technology market. Also because knowing how your Fintech business makes money depends on what you do. So, we can classify Fintechs into these categories mainly.

  • Budgeting, money management
  • Insurance
  • Crowdfunding
  • Crypto
  • Lending
  • Digital Banking
  • Digital Payment
  • Robo-advising

At its core, the revenue model of any Fintech business shall be based on: the payment structure, who pays, and how it affects consumers. It could become challenging for a business to make money, supporting the company’s mission and vision at the same time. 

There are many different types of Fintech out there, each with its own unique revenue model. Neo-banks such as Revolut and Monzo are some of the most mainstream Fintech, but many others are making money differently. Now, let’s explore them.

How does Fintech make money?

Advertising: a mainstream revenue model

One of the easiest ways to initiate a business and make money is by advertising. Ads are created to sell products and services. For example, if you run a pet store, you can sell ads to dog food and treat companies to show their ads when someone uses your pet store search engine. 

This works because the search engine gathers traffic to the store, and since the pet store owner owns the website, they can sell ads to other companies. This is one of the oldest and most well-known revenue models. It really doesn’t matter what industry you’re in. You can put up ads and make money.

An example of this in Fintech is NerdWallet, an American personal finance company that offers excellent money-tracking tools, personal finance tips, free credit reports, and more. The free-to-use personal finance management platform makes money through ads, affiliate marketing, and partners to review and promote their products.

Subscriptions: an elite revenue model

Subscription-based business models are prevalent among many types of startups. However, in the financial and banking industry, subscription-based models are also quite common, even though they are different from other types of businesses. 

The main reason the subscription model is so popular is that it allows financial service providers to make more money in the long-term while charging customers less over a more extended period.

Another reason is that it is a direct and regular income source from the loyal user base of a Fintech company. Moreover, it is plain as day as you charge a flat fee and no percentage planning on specific amounts or third-party involvement.

Robo-advisors: a techie revenue model

Fintech companies have recently been shaking up the financial world with their innovative technologies and products. One area where Fintech has made a significant impact is in the realm of investing, where traditional financial firms have been slow to adapt.

Fintech firms have quickly developed and adopted new technologies, including Robo-advisors. Robo-advisors are automated investing platforms that provide recommendations and manage portfolios for their clients. They offer a number of advantages over traditional human advisors, including lower fees and the ability to operate 24/7.

So how do Fintech firms make money with Robo-advisors? There are a few different ways, but the most common is through asset management fees. These are fees charged by the firm to manage the client’s money, and they are typically a tiny percentage compared to in-person investment managers. 

For example, investment managers can charge 1% or more, whereas Betterment, a financial advisory company, charges 0.25%. As Robo-advisors use algorithms and automate management, allocation, and asset optimization, overhead costs are also lower.

Data: a lucrative one

The Fintech industry has been growing at lightning speed over the past few years. As a financial technology company, you’re probably familiar with the phrase, “If you’re not paying for the product, then you are the product.” This means that Fintech companies have been trying to squeeze a profit out of user data.

In the fintech revenue model, data is Gold Mine. By leveraging data, fintech startups can identify opportunities for monetization and growth. There are a few different ways that fintech startups can monetize data. 

The most common is through advertising. Fintech startups can sell access to their data to advertisers, who can then use that data to target ads to the right consumers. Another way to monetize data is through subscription fees. Fintech startups can charge consumers a monthly or annual fee to access their insightful data.

Data is also a key ingredient in the fintech revenue model because it can be used to drive growth. Fintech startups can also use data to improve their products and services and to identify new areas for expansion. 

However, before monetizing data, you require careful planning and strategy. You need to focus on increasing the data economically, either upselling or cross-selling, to enhance the data value. 

Third-parties for party revenue

Third-party collaborations can be a lucrative way for fintech companies to make money. By working with other companies, they can tap into new markets and receive valuable insights that they may not have been able to find on their own. 

Additionally, by collaborating, fintech companies can offer new products or services that they may not have been able to create on their own. This can lead to increased revenue and a more substantial presence in the market.

For example, a fintech company could partner with a credit rating agency to provide credit scoring services. This would allow the fintech company to tap into a new market without having to develop its own product.

A real-world example of this revenue model is Coinbase– a crypto buy-sell marketplace. It has partnered with Expedia, Dell, and others, enabling bitcoin payment functionalities with Paypal and Stripe. 

The model is pretty straight: bringing in customers, the Fintech directs them to the third party, and in return, the third party offers a share of their revenue to the Fintech. Hence, by collaborating with third parties, fintech companies can also increase their reach, expand their customer base, and make more money.

There you are…

So, there you go with several top-notch revenue models to make money. You can use it as per the type of your Fintech business. However, while Fintechs prefer to stick to just one model in the real world, some companies use several, and some will use as many as they find. And some companies, like Zopa and Transferwise, have also proven it to be efficient. 

What do you say?

Tapas Raval

I Help The Company’s Founders, CXO, and Product Owners To Achieve Their Goals By Providing Mobile And Web Development Services.

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