Financial technology is a collection of new technologies used to automate and improve the delivery of financial services. The innovation has triggered a lot of positive changes in the business arena. Initially, during its emergence, financial technology was solely used to describe back-end system technology in well established financial institutions. But currently, fintech cuts across several industries and sectors due to the shift to consumer-oriented services.
Small business makes up a significant portion of the economy. Through fintech, financial services are now offered directly to these small businesses. Most small businesses are dependent on financial technology to manage their cash flows. Also, many small businesses rely on fintech to acquire funding.
Below are several ways that small businesses and banks may benefit from adopting financial technology.
Payment Automation
Automatic payments are made by an individual or business instructing a bank to make a money transfer on a set date, and the amount is also set. These kinds of transactions are mostly made with credit cards and for paying bills. Most consumers currently prefer to pay using debit and credit cards at the local stores. Through this kind of convenience, small businesses do not have to send someone down to the bank to pay their bills. By expanding to use the card payment, small businesses have the advantage of making more sales. Banks can serve more clients through an automated system.
Funding
The most vital ingredient of a successful startup venture is capital. Fintech has taken up the initiative to provide much easier and faster loan terms. Thanks to several software and applications developed, clients can make their loan applications in the comfort of their homes. With the current funding facilities, Fintech has greatly eased the funding criteria for many lenders. Small businesses no longer have to take loan applicants through the s long and tedious review process.
Fraud Detection
Fintech has dramatically eased the way businesses make transactions. The easier it is to make transactions, the more transactions are secured. But much often, such ease and convenience come at a cost. While individuals can make transactions from their smartphones now, frauds have an equal opportunity for launching fraudulent attacks and transactions.
Advancement of technology has dramatically influenced the number of online criminal activities, even on a global scale. This has fueled the need for a more robust banking system. The traditional system no longer does the job. The conventional method was to find transaction anomalies using predefined checkpoints. Financial technology has now embraced machine learning to develop a more responsive fraud detection system.
Money Transfer
To cut down on costly bank fees, small businesses can utilize the Fintech powered money remittance and transfer platforms. Fintech services such as Currencyfair and Kantox enable global-minded small businesses to make international transactions by offering a quick and safe platform. This provides an edge to these daring small businesses to increase their customer base by venturing into the global market. All this enabled by foreign exchange services powered by financial technology.
Electronic Invoicing and Expense Tracking
Financial technology has made it cost-effective and affordable for small businesses to acquire tools which were previously too costly for them to maintain. To enable these startups to achieve their business needs, fintech has provided expense tracking tools that are flexible enough. Also, by offering white labels, small businesses are now able to offer credit to their customers using fintech. Previously, offering credit services was a highly risky activity, especially for small companies and startups.
Financial technology has considerably eased operations between banks and businesses through Fintech firms’ solutions such as Sage. Through sage, small to middle-sized companies can track the amount of money going in and out of the company’s accounts. They can then be able to monitor how the money is spent.
Data Enrichment
Banks can utilize fintech’s data to assess and determine their customers’ preferences. The data can also be used by banks to probe what consumers usually spend most of their cash on. By partnering with Fintech firms, banks can tap onto the numerous benefits of data enrichment. By understanding what their customers prefer, legacy financial institutions can strive to offer tailored financial solutions. This should generally result in better customer retention and satisfaction.
Over time, financial technology has grown into a significant disruptor of many challenges faced by small businesses in a bid to expand. It has played a vital role in bridging the gap between banks and small growing companies. While banks may view the small startups as too risky to invest in, financial technology has spread and mitigated the risk.
