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Home » 5 Reasons Why Launching a Fintech Startup Has Become So Difficult
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5 Reasons Why Launching a Fintech Startup Has Become So Difficult

4 Mins Read
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By Pavel Chynkarenko

The fintech industry recorded its best year ever in terms of investment value in 2021, but the market has been much more difficult for two years.

Fintech startups have had to adapt to this new reality, where explosive growth is no longer the priority, and companies that cannot demonstrate a clear path to profitability struggle to raise follow-on funding.

That doesn’t mean it’s impossible to launch a new fintech business. It just means the rules have changed. Here are five reasons why the landscape has become more complex.

Decrease in investment volume due to changing trends

According to S&P GlobalVenture capital investments in fintech companies fell 36% year-over-year in Q3 2023. The fintech sector no longer has the FOMO factor, which is now mainly in the hands of AI and machine learning.

This has particularly affected early-stage companies, which now have to compete with more established startups for funding. Fintech startups in the development stage are an exception. could grow by another 15% in the coming yearsproving that the field is open to those who focus on long-term value.

Governments tighten regulation

Regulators are introducing strict measures that make it difficult for businesses to grow sustainably. Cryptocurrency is also now targeted by regulators.

Pavel Shynkarenko, Founder and CEO of Solar Staff

In the United States, Europe and Asia, compliance requirements for knowing your customer and your business are becoming more stringent.

For example, Singapore, Malaysia, Thailand and the Philippines have all introduced bills aimed at regulating electronic money transactions. In Europe, due to the PSD3 Directive issued by the EU, Electronic money institutions have completely disappearedbecause companies must now be licensed as payment institutions.

The fintech sector has reached maturity and, in this phase, margins are decreasing and standardization is increasing. Each new player must adhere to established standards and will often not be able to achieve operational profitability in the short term. This makes the barrier to entry higher and prolongs the “valley of death” for companies that have survived their early years.

Deglobalization

Apart from global policies, there are also national restrictions that fintech companies must comply with.

This makes it particularly difficult for companies operating cross-border, as they have to take into account different rules at the same time. and these rules can sometimes conflictthereby eliminating the viability of smooth and affordable cross-border transactions.

Price competition

For a new startup, it is difficult to compete in the market because of the prices charged by existing players. For example, it is currently impossible to offer costs lower than those Wise, Skrill Or Bandespecially when Wise charges less than a dollar for cross-border transfers.

It should also be noted that many deposit and withdrawal methods are expensive to integrate and it takes time to reach the scale needed to make them more affordable. Specific subcategories or specializations may need to be explored, but other challenges listed here will likely hinder progress.

Geopolitical instability

Military conflicts create uncertainty, which generates volatility in foreign exchange markets. The fragmentation of the geopolitical landscape makes opening offices in new countries even more difficult, especially as the list of entities and individuals with which U.S. companies cannot interact – due to sanctions – continues to grow.

However, the situation is not entirely hopeless.

On the one hand, startups that focus on a specific niche where regulation and bureaucracy are not pervasive – for example, personal finance – can experience healthy growth and generate impact.

On the other hand, fintech startups that have considerable capital and a network to navigate the complex regulatory landscape may still have a chance to emerge triumphant on the other side.


Pavel Chynkarenko is the founder and CEO of Solar sticka fintech/HR company for freelancers that generated $9M in revenue in 2023 and works with freelancers from 143 countries. He has over 20 years of experience in financial and legal technology, business development, and client-contractor relationship automation.

Illustration: Dom Guzman

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October 23, 2025
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