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ReadersSpeak

The expensive problem facing fintech startups stress on startups. "Payment-specific chal-
lenges require expertise to select, acquire and
n a recent email, John Cragg, CEO of MYHSM, said we're in operate approved POS terminals and pay-
the fintech startup decade, and major financial institutions are ment HSMs. These can be expensive; own-
striving to maintain dominance while transactions become ing them will not bode well for the startup's
I increasingly frictionless and new fintechs lead in innovation. He balance sheet. Looking at HSMs, one is never
mentioned that one EU PSD2 objective is to increase competition in enough; you'll need at least one more for test-
payments and encourage involvement by non-banks, creating fintech ing and development, and one for standby.
opportunities. HSMs also need to be purchased early in the
product development cycle for testing. Es-
Cragg noted that payments startups face similar challenges to startups tablished competitors will already have this
elsewhere. "They must establish financing and convince investors their technology in place, making time of the es-
idea will convert into real money," he wrote. "They may have to experi- sence for startups.
ence several rounds of this. Backers will closely watch the companies
they entrust with their investments to ensure that the money is spent "The biggest issue facing startups is pricing.
only on essentials. Thus, startups must enter the market quickly to beat HSMs and POS terminals are too expensive
their competitors and ensure fast returns on investment. for a single purchase early in a company's
life. To assist, companies can make HSMs
"Fintech startups in the payments ecosystem face additional challeng- and POS terminals affordable; however,
es, such as security standards enforced by bodies like the PCI Security technology providers also need to make a
Standards Council. These standards play a critical role in protecting profit. "The solution: eliminate the need for
consumers, merchants and financial institutions, but they put added HSM capital purchases by offering them as
a fee-based service that can be implemented
quickly. For POS terminals, provide a less ex-
pensive product. This can be done by using
off-the-shelf software that can turn a mer-
chant's smartphones and tablets into POS
terminals. That way purchasing additional
devices becomes unnecessary.

In addition, HSMs must be accommodated
in secure, PCI-compliant, resilient data cen-
ters. "Skilled security specialists are needed
to determine how to set up the HSMs, and
thereafter design, document, and audit the
procedures used to manage and operate the
HSMs," Cragg noted. "Finally, specific appli-
cation-related approvals, such as PCI PIN,
need to be renewed every couple of years.
"Fintech startups face all of this when what
they really want is to create an exciting prod-
uct and get it to market quickly. Fortunately,
technology providers can help. By acquiring
payment HSM capability as a pay-as-you-go
service, fintech startups avoid HSM invest-
ment demands, compliance headaches and
other headaches.

"Developing a product and getting it to mar-
ket quickly is any fintech startup's driving
motivation. By collaborating with technology
providers, startups join an ecosystem where
they are visible to customers and potential
partners, helping to amplify their voices
above the competition's clamor."

What are today's pressing issues?
What are the major challenges in payments
now? Please send your perspectives to
greensheet@greensheet.com.
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