Security Needs to Be the DNA of Any Fintech Startup

May 11, 2017

2:20 pm

Launching a fintech startup in a regulated industry is going to take a proactive approach. Surrounding yourself with mentors and experts in the field to guide you through the hills and valleys will be the key to success in fintech.

Columbus Startup Week powered by Chase for Business hosted a panel to discuss the future of fintech. Panelists included Kevin Pohmer, former CEO and chairman of Financial Guard and founder of FinTech 71, and Jason Strle, CIO of Chase Consumer and Business Banking. Mike Nemeth, CEO of S3 Planning and lead organizer of this year’s Columbus Startup Week, moderated the discussion.

Pohmer, who led Financial Guard, the premier “fixed fee” online investment advisor that was acquired by Legg Mason in 2016, said that if you’re going to create a product in a regulated industry you need to do your research and really know what you’re getting into or you could lose your shirt.

“We spend time early on understanding the regulatory compliance environment before trying to acquire customers and launch our startup,” Pohmer said. “You are dealing with people’s money, retirement, and personal management solutions-and [if you get it wrong] it can cost your brand, business and determine success in the long run.”

Security Needs to Be in the DNA of Any Startup

Customers need to trust that when they use financial services their personal and financial information is secure, period. Strle couldn’t stress enough to founders the importance of having a security-first mindset when building their product.

“You want to think about how to detect fraud and protect people’s private information, it’s unbelievably important. You need to know what you’re getting into,” Strle said. “Focus on having the same mentality, culture and mindset to protect the customer at all costs.”

Pohmer took the ‘try to break it’ approach with Financial Guard and brought in outside people to purposely attempt to hack the system to expose any holes.

“With compliance and security, don’t think you can do that internally. Bring in people to try to break your system. Our mindset was ‘let’s try to break this thing before we start working with the big boys’. There is a high sensitivity to security and the worst thing for a small company to have is a breach,” Pohmer said.

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Transforming the Financial Industry

The known startup mentality is to disrupt an industry, do something that has never been done before, or shaking up the way things have always been done. For fintech founders, Pohmer suggests shifting to a “transformative mindset” where their technology could help larger institutions solve problems for their customers. Pohmer pivoted his product to a B2B solution that allowed large corporations to bolt it onto their current services.

“We started out as a B2C product and we could have succeeded, but we asked ourselves if we want to be competing with the big financial services year after year.” Pohmer said. “To transform an industry is just as cool as disrupting an industry.”

Whichever mindset you choose, it’s important to stick to the core mission of your product.

“Be true to your technology. If it differentiates, this is the value that you bring,” Strle said. “Lots of times the problems aren’t exotic, but the technology solves a problem. There are tech companies who have learned along the way that creative solutions and a great story can be [attractive] to a buyer of the product.”

Diversity Matters

Having a diverse and inclusive team has shown to not only improve the bottom line but enhance the quality of a product. And when fintech founders are building a solution, having those perspectives can be attractive to larger businesses.

“A company that works for us that has an inclusive team will win every time,” Strle said. “Their products, ideas, the way they approach products will win in the long run. You’ve got to make that a priority to creating a diverse and inclusive workforce, it’s critical to success and a lot of the companies who don’t’ get that won’t be a company for very long.”

Mobile is the Future

With more consumers conducting business on-the-go, the need for mobile solutions is at the forefront of financial institutions, and with it comes the need for more security.

“The customer is asking for convenience, and mobile-first is our motto,” Strle said. “[We ask companies] how they enable that solution on a mobile device [as well as] its physical presence and location. [However,] with that ease of use comes with it a litany of fraud challenges and how a customer will use these solutions without experiencing fraud. Thus, the cybersecurity concern grows with it.”

Read more about fintech startups at Tech.Co

chase for businessThis article is part of a Startup Week content series brought to you by CHASE for BUSINESS. Startup Week is celebration of entrepreneurs in cities around the globe. CHASE for BUSINESS is everything a business needs in one place, from expert advice to valuable products and services. Find business news, stories, insights and expert tips all in one place at Chase.com/forbusiness. Read the rest of our Startup Week series.

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Tishin is a technology journalist and correspondent. She has written for TechCrunch, Demand Studios and Fitness, and has regular network segments on local Phoenix affiliate stations. She holds a Master's degree in Clinical and Sport psychology, and has covered many areas of technology ranging from 3D printing and game development to neurotech and funding for over 15 years.

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