Developing a financial app
February 4, 2025 11:09 AM Subscribe
My friend has a genuinely amazing idea for a financial app. The app would need to be able to accept deposits and make payouts (somewhat similar to Venmo, but on a larger scale). My friend doesn't have a finance or programming background, so he can't make it himself... but the idea is simple and awesome enough that the concept could easily be stolen if he shares the idea with the wrong person. So, three part question about how to make the app, and retain the IP....
(Ok I know this sounds like "yeah yeah everyone tries to make an app", but trust me, this idea is genuinely great and nothing like it currently exists. So just go with me... how?)
A - How can he find people with the app-developing skills to get this app made?
B - Who has the banking knowledge to create an app like this? The app will need regional versions to comply with finance regulations, tax laws, etc.
C - As the originator of the idea, how can my friend retain ownership of the IP so that if the app gets made, he makes a fair cut of the profits?
(Ok I know this sounds like "yeah yeah everyone tries to make an app", but trust me, this idea is genuinely great and nothing like it currently exists. So just go with me... how?)
A - How can he find people with the app-developing skills to get this app made?
B - Who has the banking knowledge to create an app like this? The app will need regional versions to comply with finance regulations, tax laws, etc.
C - As the originator of the idea, how can my friend retain ownership of the IP so that if the app gets made, he makes a fair cut of the profits?
accept deposits and make payouts
This is basically like starting a bank: money transmitter businesses are regulated in ways your average app isn't.
posted by BungaDunga at 11:27 AM on February 4 [14 favorites]
This is basically like starting a bank: money transmitter businesses are regulated in ways your average app isn't.
posted by BungaDunga at 11:27 AM on February 4 [14 favorites]
As someone who recently retired from 47 years of Banking Financial Programming I would agree with The_Vegetables that you want someone who knows the big picture, knows how to interview people who can program from detailed functional specifications, knows the pitfalls to watch out for, etc.
Before typing this I spent a bit of time looking for an article I saw recently which was something like "No Excuses Any More for Programmers Who Can't Settle Financial Transactions by date, currency, batch, etc." Obviously the title wasn't that because I probably would have found it. But if I do find it I will post a link to this thread.
Multi-currency is a pain, regulation is a pain, order of computation is a pain (hint: what is 3 * (7 / 3). Your calculator knows it's 3, but depending on what language you use and how the variables are defined in that language, you might not get 7.
Also, my knowledge was on the Deposit or Loan Accounts or Credit Card Issuance and Security side, I don't know anything about the hurdles of accepting retail payment over the Web. Also I imagine that there are considerations related to the streaming of the transactions and responses back to the customer (e.g., JSON as a lingua franca).
posted by forthright at 11:30 AM on February 4 [2 favorites]
Before typing this I spent a bit of time looking for an article I saw recently which was something like "No Excuses Any More for Programmers Who Can't Settle Financial Transactions by date, currency, batch, etc." Obviously the title wasn't that because I probably would have found it. But if I do find it I will post a link to this thread.
Multi-currency is a pain, regulation is a pain, order of computation is a pain (hint: what is 3 * (7 / 3). Your calculator knows it's 3, but depending on what language you use and how the variables are defined in that language, you might not get 7.
Also, my knowledge was on the Deposit or Loan Accounts or Credit Card Issuance and Security side, I don't know anything about the hurdles of accepting retail payment over the Web. Also I imagine that there are considerations related to the streaming of the transactions and responses back to the customer (e.g., JSON as a lingua franca).
posted by forthright at 11:30 AM on February 4 [2 favorites]
If the idea is so simple and awesome, why haven't other more established financial institutions done it already? Don't assume they haven't already thought of it.
Just "having an idea" doesn't bring anything to the table. Executing any sort of financial app is going to cost millions of dollars of investment to even reach MVP -- the app is the easy part. And you'd better hope your fraud protection is good enough that you don't get completely cleaned out immediately. Financial fraud is very rampant on the modern Internet.
In other words yeah, you'd basically be starting a bank, with all that entails. Starting a bank needs money, lots of it. It's not something you can do as a scrappy startup (maybe PayPal did 30 years ago, but a lot has changed in 30 years).
posted by neckro23 at 11:33 AM on February 4 [16 favorites]
Just "having an idea" doesn't bring anything to the table. Executing any sort of financial app is going to cost millions of dollars of investment to even reach MVP -- the app is the easy part. And you'd better hope your fraud protection is good enough that you don't get completely cleaned out immediately. Financial fraud is very rampant on the modern Internet.
In other words yeah, you'd basically be starting a bank, with all that entails. Starting a bank needs money, lots of it. It's not something you can do as a scrappy startup (maybe PayPal did 30 years ago, but a lot has changed in 30 years).
posted by neckro23 at 11:33 AM on February 4 [16 favorites]
C - As the originator of the idea, how can my friend retain ownership of the IP so that if the app gets made, he makes a fair cut of the profits?
Like the rest of this, the answer is going to be lawyers. You'll need contracts. Your friend needs to know that you can own a company; you can own source code. You cannot own an idea. (I am assuming there are no patents involved.) Even assuming you solve A and B, there is absolutely nothing stopping somebody else from saying "oh let's make our own" the next day. This is one of the truly hard things about starting a business doing a truly novel thing: You cannot stop your competition from copying you. You can be faster, you can be better, you can become so synonymous with your niche that you can't be readily displaced (like how Venmo remains huge in its space despite Cash App, Zelle, etc coming along.) But you cannot lock down an idea.t If your friend is truly serious, and has ways to build the team (technical & legal), they should focus on building a very successful company, either to grow or sell. Trying to protect the concept is impossible.
posted by Tomorrowful at 11:33 AM on February 4 [2 favorites]
Like the rest of this, the answer is going to be lawyers. You'll need contracts. Your friend needs to know that you can own a company; you can own source code. You cannot own an idea. (I am assuming there are no patents involved.) Even assuming you solve A and B, there is absolutely nothing stopping somebody else from saying "oh let's make our own" the next day. This is one of the truly hard things about starting a business doing a truly novel thing: You cannot stop your competition from copying you. You can be faster, you can be better, you can become so synonymous with your niche that you can't be readily displaced (like how Venmo remains huge in its space despite Cash App, Zelle, etc coming along.) But you cannot lock down an idea.t If your friend is truly serious, and has ways to build the team (technical & legal), they should focus on building a very successful company, either to grow or sell. Trying to protect the concept is impossible.
posted by Tomorrowful at 11:33 AM on February 4 [2 favorites]
I still didn't find the article I read about the complexities of financial programming, but here are a couple in the general ball park:
- https://dev.to/mdesenfants/falsehoods-programmers-believe-about-finance-53hm
- https://stackoverflow.com/questions/3840793/rounding-standards-financial-calculations
I also neglected to mention that there needs to be a solid test/development environment. You don't get to "test in production" or use "simulated transactions", at least not in the 21st Century.
I would also now add that yes, there are at least 3 (probably many more) serious concerns involved: 1) making sure you're not hacked and don't lose all your money 2) making sure you do not make serious mistakes that cause you to be sued 3) making sure you do not make serious mistakes that cause you to lose your ability to conduct transactions with other Banks because you violate some rules or end up being a conduit for hacking.
posted by forthright at 11:57 AM on February 4 [4 favorites]
- https://dev.to/mdesenfants/falsehoods-programmers-believe-about-finance-53hm
- https://stackoverflow.com/questions/3840793/rounding-standards-financial-calculations
I also neglected to mention that there needs to be a solid test/development environment. You don't get to "test in production" or use "simulated transactions", at least not in the 21st Century.
I would also now add that yes, there are at least 3 (probably many more) serious concerns involved: 1) making sure you're not hacked and don't lose all your money 2) making sure you do not make serious mistakes that cause you to be sued 3) making sure you do not make serious mistakes that cause you to lose your ability to conduct transactions with other Banks because you violate some rules or end up being a conduit for hacking.
posted by forthright at 11:57 AM on February 4 [4 favorites]
The likelihood that your friend has come up with a legally patentable (i.e. novel and non-obvious) idea in the realm of payments is extremely far fetched. It is much more likely that he has independently (and accidentally) invented some type of fraud that already exists, and that's why no one is doing it.
posted by Horkus at 11:59 AM on February 4 [19 favorites]
posted by Horkus at 11:59 AM on February 4 [19 favorites]
Give a more blunt answer to your questions: Unless your pal is willing to put 10 figures of their own money into this, it's not likely to happen.
3-4 years ago I might have suggested adding "...using crypto!" to end of the pitch to get some sucker to put in that ~$10m, but that well is pretty dry these days.
Just having the conversations with the relevant experts that will give a roadmap on how to spend those many millions of dollars is going to cost lots and lots of money.
But, that aside:
A) Who cares, this is the cheap part and not worth worrying about for a long time. Probably years.
B) Well, The Fed has a handy guide titled "How to start a bank". Not super helpful since the first step is just "first receive approval for a federal or state charter". The good news is that the team of every expensive lawyers you would have already had to hire by this point will walk you through it.
C) I do something different these days, but earlier in my career I did "Payments", and the chances your pal came up with something novel that wasn't patented years if not decades ago is going to be very small. Just about every "technological revolution" you can think of in this space is covered. I worked for a big financial services company you've heard of when Square got popular, and the parts of entire business model that weren't "What if we just let anyone asshole take credit cards?" was all based on patents licensed to them by us. In hindsight, our 'lol, it's your money..." to those licensing agreements didn't age well lol.
posted by Back At It Again At Krispy Kreme at 12:13 PM on February 4 [6 favorites]
3-4 years ago I might have suggested adding "...using crypto!" to end of the pitch to get some sucker to put in that ~$10m, but that well is pretty dry these days.
Just having the conversations with the relevant experts that will give a roadmap on how to spend those many millions of dollars is going to cost lots and lots of money.
But, that aside:
A) Who cares, this is the cheap part and not worth worrying about for a long time. Probably years.
B) Well, The Fed has a handy guide titled "How to start a bank". Not super helpful since the first step is just "first receive approval for a federal or state charter". The good news is that the team of every expensive lawyers you would have already had to hire by this point will walk you through it.
C) I do something different these days, but earlier in my career I did "Payments", and the chances your pal came up with something novel that wasn't patented years if not decades ago is going to be very small. Just about every "technological revolution" you can think of in this space is covered. I worked for a big financial services company you've heard of when Square got popular, and the parts of entire business model that weren't "What if we just let anyone asshole take credit cards?" was all based on patents licensed to them by us. In hindsight, our 'lol, it's your money..." to those licensing agreements didn't age well lol.
posted by Back At It Again At Krispy Kreme at 12:13 PM on February 4 [6 favorites]
I agree with others that the idea has no value without building the solution.
If your friend wants to do this he needs to hire someone to build it. Probably a consulting company. Hiring a manager and developers only makes sense if you expect to employ them full time for quite awhile. The consulting company will have their own lawyers and their contracts should cover a NDA.
"Stealth mode" is often used to refer to startups that don't even let the idea be spoken until after launch. But still, after launch, other companies can and will clone the product.
Something like Stripe Connect would be the way to build an app with payments like this -- it is meant for marketplaces. There are probably other competitors. All will be a premium in day-to-day costs over building it yourself but save you a fortune compared to building it out yourself.
Banking knowledge should only be slightly required ... almost all of it will be handled by something like Stripe. Lawyers will be needed to make sure you aren't violating any financial laws, however.
posted by miscbuff at 12:15 PM on February 4
If your friend wants to do this he needs to hire someone to build it. Probably a consulting company. Hiring a manager and developers only makes sense if you expect to employ them full time for quite awhile. The consulting company will have their own lawyers and their contracts should cover a NDA.
"Stealth mode" is often used to refer to startups that don't even let the idea be spoken until after launch. But still, after launch, other companies can and will clone the product.
Something like Stripe Connect would be the way to build an app with payments like this -- it is meant for marketplaces. There are probably other competitors. All will be a premium in day-to-day costs over building it yourself but save you a fortune compared to building it out yourself.
Banking knowledge should only be slightly required ... almost all of it will be handled by something like Stripe. Lawyers will be needed to make sure you aren't violating any financial laws, however.
posted by miscbuff at 12:15 PM on February 4
Leaving aside the idea that it's possible this is a great idea that nobody's thought of before...
What sounds improbable is someone who "doesn't have a finance or programming background" building a successful app that processes deposits and payouts "similar to Venmo but on a larger scale(!)"
A and C are the easiest: money.
B is harder: waaay more money and the biggest risk of lawsuits and fines. As folks have said above: banking is a highly regulated industry.
And maybe C isn't so easy after all. Sure, he can protect his IP on paper. But if the app is so "simple and awesome that the concept could easily be stolen if he shares the idea with the wrong person" ... how does he expect to even make it to launch without it getting stolen by a giant bank or fintech?
He's going to have to pitch this simple idea everywhere to get funding. The industry folks (fintech developers, bankers, legal, risk, etc) he hires are going to leak. The idea is going to get out there early and often.
posted by Text TK at 12:22 PM on February 4 [1 favorite]
What sounds improbable is someone who "doesn't have a finance or programming background" building a successful app that processes deposits and payouts "similar to Venmo but on a larger scale(!)"
A and C are the easiest: money.
B is harder: waaay more money and the biggest risk of lawsuits and fines. As folks have said above: banking is a highly regulated industry.
And maybe C isn't so easy after all. Sure, he can protect his IP on paper. But if the app is so "simple and awesome that the concept could easily be stolen if he shares the idea with the wrong person" ... how does he expect to even make it to launch without it getting stolen by a giant bank or fintech?
He's going to have to pitch this simple idea everywhere to get funding. The industry folks (fintech developers, bankers, legal, risk, etc) he hires are going to leak. The idea is going to get out there early and often.
posted by Text TK at 12:22 PM on February 4 [1 favorite]
My friend doesn't have a finance or programming background, so he can't make it himself...
What does he have? Experience in sales? Project management?
One long-term route would be to get a job at a fintech company that is doing work in the general space his idea lives in. He would aim to spend some time (like, some years) doing in-depth and hands-on learning about the industry, about finance, about regulations, and about software project management. And making connections. After a few years he would hopefully find himself at a point where (a) he can evaluate his idea realistically and either (b) find a way to get his employer or a similar company to implement it, with himself in a leadership role in the project, or (c) have enough experience and connections to put together a convincing team that can get investor funding to build this thing.
Is his dream to see this thing be created (because it's a good thing that should exist)? Or is it to start his own hotshot company and get super rich?
He'll have a better chance with the former, probably - if the reason this doesn't exist yet is that nobody's thought of it, and not that it doesn't make good business sense, technological sense, or legal sense. Either way, he needs to become someone who does have enough understanding of finance and of how building a software product works to be able to make good decisions here.
posted by trig at 12:24 PM on February 4 [6 favorites]
What does he have? Experience in sales? Project management?
One long-term route would be to get a job at a fintech company that is doing work in the general space his idea lives in. He would aim to spend some time (like, some years) doing in-depth and hands-on learning about the industry, about finance, about regulations, and about software project management. And making connections. After a few years he would hopefully find himself at a point where (a) he can evaluate his idea realistically and either (b) find a way to get his employer or a similar company to implement it, with himself in a leadership role in the project, or (c) have enough experience and connections to put together a convincing team that can get investor funding to build this thing.
Is his dream to see this thing be created (because it's a good thing that should exist)? Or is it to start his own hotshot company and get super rich?
He'll have a better chance with the former, probably - if the reason this doesn't exist yet is that nobody's thought of it, and not that it doesn't make good business sense, technological sense, or legal sense. Either way, he needs to become someone who does have enough understanding of finance and of how building a software product works to be able to make good decisions here.
posted by trig at 12:24 PM on February 4 [6 favorites]
Ideas area a dime a dozen. It's execution thats the hard part. Once you involve financial regulations, the amount of red tape and regulations that need to be followed will be mind boggling. The actual code here is going to be the easy part. But how is this going to be be funded? Whats the business model? How will you get users? Who is project managing the whole thing?
Again, the code part is not the hard part. Everything else around legalities, funding and how to be profitable are the questions that need to be asked.
posted by cgg at 12:59 PM on February 4 [7 favorites]
Again, the code part is not the hard part. Everything else around legalities, funding and how to be profitable are the questions that need to be asked.
posted by cgg at 12:59 PM on February 4 [7 favorites]
Oh, and if he's worried that spending all that time gaining knowledge, experience, and connections will enable some other hotshot team to come up with the same idea on their own and get a head start and capture the market: it's not all about being the first mover. As someone mentioned above, even if he did successfully get this product created and launched, other companies, including ones with way more resources and industry presence, can see what he's doing and create their own versions which may still eat his lunch. If someone else does it first, he can aim to be part of the company that eventually eats their lunch in the same market, or that brings the service to a different market.
posted by trig at 1:01 PM on February 4 [2 favorites]
posted by trig at 1:01 PM on February 4 [2 favorites]
I’d start by talking to a patent attorney. They can help you determine if the idea is one that can be patented. Once you’ve got a provisional patent, your IP is protected and then you could start talking to finance people and app developers. If the idea is truly worth anything, I wouldn’t start by talking to people who could implement it until talking to an IP attorney.
(Credentials: have 5 patents issued with my name as an inventor. Three have been licensed by companies. Zero royalties into my pockets so far. )
posted by u2604ab at 2:29 PM on February 4 [4 favorites]
(Credentials: have 5 patents issued with my name as an inventor. Three have been licensed by companies. Zero royalties into my pockets so far. )
posted by u2604ab at 2:29 PM on February 4 [4 favorites]
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The answer to C is lawyers and contracts.
posted by The_Vegetables at 11:15 AM on February 4 [7 favorites]