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Market research

How to create a fintech platform: market analysis and our experience

22.11.2021

In the spring 2021 we received an order to develop a new financial platform for one large customer. The client asked to consider all available options on the market and offer him specific solutions.
In this article we’ll share with you our experience and conclusions.

Technical task

Our client was interested in creating his own investment platform. This site should represent companies, which are owners of buildings and other real estate and users of the platform are invited to buy stocks of any of these companies in order to receive dividends.

The idea was to provide an opportunity to one small investor who is not able to buy an entire hotel for example and start his own business on it. But a large group of such investors can organize and buy out shares and do something similar. According to the technical task, the Internet platform had to automate the investment process.

The task was somewhat reminiscent of a crowdinvesting platform. But the difference is that the clients of our platform were offered to invest not in startups, but in real estate businesses.

So, go ahead

Suppose, you want to create your own investment, lending, banking or some other financial platform.

What options do you have for obtaining software for launching such project?

First option: create platform on your own

Most fintech startups follow a similar path. Part of our team participated in the creation of a P2P lending platform, which raised 70 million euros from private investors in Europe, so we know the exact numbers and budget.

To develop your own investment platform on your own, you will need at least an IT department of nine people:
- Technical Director,
- 5 Full Stack Developers (Senior),
- 2 testers,
- 1 DevOps.

Often mistakes made at the beginning can be very expensive in the future, so senior developers are needed. In addition, at the beginning there is simply not enough time for code review.

Thus, the maintenance of such IT department will cost about 40 thousand euros per month. This team of professionals will take 6-12 months to develop the platform (depending on the selected technical solutions).

The hardest part is to bring such a team of professionals together. There are not enough experienced developers in the IT market.

The second difficulty is that the final product may not meet regulatory requirements.

The second option: order a platform on outsourcing

This option seemed to us the most uncertain, since it was not clear where to look for these developers, what the price of their services might be, and how to correctly formulate the technical task so as not to forget something and then not to get additional costs.

The first thing we did was compile a list of 117 top web studios. It included almost all companies from the "Rating of Web Studios 2020" list, as well as a number of companies from the Baltic States, Ukraine, Belarus and Kazakhstan, which were actively promoting themselves at that time.

In the second step, we compiled a letter about which platform our client needs. Specifically, they did not load it with details and requirements for architecture. The letter turned out to be open enough to understand their level of competence from the company's response.

Translation text of my colleague's letter

Hello!

My name is Mikhail, our company is choosing a contractor to develop a complex fintech platform. The site will be dedicated to real estate investment. The site will feature companies that own real estate, and users will be invited to buy shares of these companies to receive dividends.

One part of the platform must be public. This will be the site as well as the client's account. The second part of the site should be accessible only to our staff and it will be possible to manage all the platform data on it. The third part of the site is an API by which partner services can integrate with our project.

Now I need to provide the management with an approximate time frame and quotation for the launch of such a product. The file https://yadi.sk/i/3JKaDTo49dCZKA indicates what should be on the site.

Questions:

1. Has your company done projects of similar complexity? Can you give examples?

2. What will be the order of the price and terms of development of the platform I have indicated? Currently, there is no technical specification and exact numbers are not required. Approximate values are of interest.

3. What technologies would you use for this project?

Please send your answers to your questions by March 11, so that I can present our management with an initial proposal and your company to discuss further cooperation.

Sincerely,
Mikhail Piskunov
CPO

We sent all letters through a specialized service so that each letter reaches the addressee. Some companies have been contacted via a form on their website.

The letter specifically indicated a two-week period for receiving a response. In the case when the contractor company cannot inform the client about the price and terms even for such a time, what will happen in the development and launch process?

Research results

61% of 117 web studios did not answer us. This was unexpected as they were approached by a large potential client. We made clarifying calls and correspondence with each responding company.

36% of the 46 responding companies had to be crossed out:
- 8 web studios could not give approximate prices and terms
- 5 companies immediately refused
- 4 honestly admitted that they did not have enough experience

17% of the 29 potential contractors were also struck out because they offered to make an investment platform on a regular CMS for websites. We think that they simply did not understand the scale of the expected work.

As a result, a list of 24 potential performers remained (1/5 of 117). The table below is an excerpt from our client report.

Prices and terms for the development of a financial platform (converted in euros)

Prices and terms for the development of a financial platform (converted in euros)

Third option: buy or rent a platform

Our client wanted to own the program code directly. Therefore, the rental options did not suit him.

All SaaS projects, unfortunately, offered only rental options. Moreover, they did not provide access to the program code and database. The customer's business would be completely dependent on a SaaS vendor's software solution without the option to go for their own solution in the future.

Alternatively, it was possible to buy ready-made program code from developers in India for 3-5 thousand dollars. We have already seen similar products before and can say that it will be difficult to find professional developers to support such legacy code. Unfortunately, we could not find other sellers of the ready-made code.

Conclusions.

1. If you have a budget of 250-500 thousand euros per year, you can hire your own programmers and launch the platform in 6-12 months.

2. If you do not have your own programmers, then you can order development from a third-party developer for 20-900 thousand euros, depending on the selected contractor. The final amount may be different, since you pay not the result, but the man-hours of the contractor's employees. The question of supporting the code and obtaining a license will also remain open.

3. If you need an MVP for market validation, then you can launch the financial platform through specialized SaaS solutions. The cost will be from 30 thousand euros per year. You won't have access to the code and database. It will be very difficult and expensive to switch an existing project from a SaaS product to its own solution in the future.

“If you want to do something well, do it yourself.”

Ferdinand Porsche

What are we doing now?

We have already made a custom crowdfunding platform for a client from Estonia and he is preparing documents for applying for a license.

The product we have developed is in demand in the market and has now grown into an independent business of launching financial platforms. You can find out more on this website.

If you have any questions or suggestions for us, we are always happy to communicate.

Financial platform Development Prices