“With the conclusion of Paycheck Protection Program (PPP), banks are focusing on forgiveness and may not be ready to ramp up small business lending that is not government-backed. Borrowers will have to turn to non-bank sources of funding.”
So if you’re thinking of going into lending, these are comforting numbers indeed.
Efficiency gets a boost
At its core, fintech is all about making traditional financial processes faster and more efficient.
This is achieved by eliminating the middleman and automating everything, which, in turn, leads to lower costs, happier employees, and a better customer experience.
One of the common misconceptions is that fintech apps only benefit financial institutions. That’s not entirely true. The application of fintech is now spilling from banks and lenders to small businesses.
This isn’t surprising, since small businesses require automation and digital technology to maximize their limited resources.
“Small businesses are looking to outsource complexity to somebody else because they have enough to worry about. SMBs want to rely on providers and operators that will make their lives simple and easy.”
For example, salary on-demand gives employees the option of accessing their wages anytime, not just on payday. They can also receive their payment in cryptocurrency or apply for a salary advance with better terms than a loan.
Giving employees these perks improves morale and boosts their output, indirectly increasing operational efficiency.
Payroll is currently one of the emerging areas in fintech, with major challenger banks like Varo and Chime getting in on the action, as this chart shows:
Above all, it’s the transparency of fintech that ultimately drives consumer trust and makes them stay. Thanks to big data and open banking, regular users have all the information required to make sound decisions.
For instance, the comparison site SuperMoney allows people to browse multiple options for loans, credit cards, and mortgages to find the best one.
The next-generation insurance technology (or insurtech) company Lemonade also makes the process of buying insurance easy and transparent.
As a final argument for the merits of fintech for customer experience, take a look at this study by Zendesk:
Guess which technology can achieve all of the above? That’s right—fintech.
Risk management is better
Better risk management is one of the crucial but lesser-appreciated roles of fintech.
If you think managing risk is only for banks and financial institutions, that’s not the case.
All businesses face risk.
One simple example is a landlord who fears that their tenants won’t be paying rent. If they have no way of knowing the creditworthiness of potential lessees, they’re essentially putting their revenue at risk.
The same is true for getting new clients into any business, especially if it’s selling high-ticket items.
In fact, a CRI Group study unveiled the top risks keeping business executives up at night:
Risk management with fintech is an effective way to close the gap and make a business stand out from the crowd.
Financial operations become streamlined
Finance is one of the most important, yet sadly often the most mismanaged areas of business. Fortunately, streamlining financial processes is one of fintech’s strongest suits.
With the emergence of digital banking platforms, it’s easier than ever for businesses to manage their books and automate critical financial operations.
For one, business owners can use digital banking apps to check their bank balances anytime.
Furthermore, they can see transactions in real-time and receive instant updates during critical events. Digital banks also allow owners and managers to send and receive payments instantly.
One key feature that separates digital banks from businesses is controlled access. With it, you can assign accounts with limited privileges to select employees.
Thus, you can enable your accounting team to send payments or view balances but not make withdrawals.
If you’re planning to create a fintech app that helps with streamlining financial operations, open banking will be indispensable. It will allow you to integrate your client’s digital banking features into your app for seamless banking operation.
Accounting and bookkeeping can also be boosted with fintech.
Cloud accounting platforms like Xero and QuickBooks enable you to organize your books and reconcile them with your bank online for accuracy.
In addition, receipts can be scanned easily from a smartphone, saving staff the time and effort to encode them manually.
Small business spending
On accounting and payments services ($ in billions)
Marko started DECODE with co-founders Peter and Mario, and a decade later, leads the company as CEO. His role is now almost entirely centred around business strategy, though his extensive background in software engineering makes sure he sees the future of the company from every angle.
A graduate of the University of Zagreb’s Faculty of Electrical Engineering and Computing, he’s fascinated by the architecture of mobile apps and reactive programming, and a strong believer in life-long learning. Always ready for action. Or an impromptu skiing trip.