Top benefits of using fintech apps for businesses

13 min read
October 8, 2021

By now, it’s no secret that fintech is an exciting niche to get into.

The entire industry is set to hit a whopping $310 billion revenue by 2022 and is expected to rise from there further. Adoption rates are also encouraging, hitting 64% already in 2020.

Of course, these are just mere facts and figures.

They don’t tell you the real reason to get into fintech: it’s a radical game-changer for businesses everywhere, not just financial institutions.

Still not convinced?

Perhaps knowing the following business benefits can convince you to take the leap.

Funding becomes more obtainable

Giving businesses quick access to loans is one of the benefits that a fintech app can deliver.

That’s because many companies can’t even survive a two-month loss in revenue, as per a 2020 survey by the U.S. Federal Reserve:

Actions business would take

In response to a 2-month revenue loss (% of employer firms)

In response to a 2 month revenue loss of employer firms

Source: Fed Small Business

Note that only 14% of small businesses surveyed had enough reserves to weather the storm. That’s why quick access to funding is so crucial for entrepreneurs.

Unfortunately, borrowing money from traditional institutions is often a slow and painful process.

In fact, it can take between a month and up to 180 days for a business loan to get approved, as lenders need to do a thorough credit check on the applicant to assess their ability to pay.

You can opt to get loans with shorter processing times, like personal loans, but those tend to have higher interest rates and a limit to the amount you can borrow.

Getting approved for a loan is no walk in the park either.

According to a Shopify statistic, only 20% of small businesses received the total loan amount they requested.

Small business loans can be hard to secure

Small business loans can be hard to secure

Source: Shopify

Making matters worse is the problem of loan discrimination. Unfortunately, loan approval is often influenced by the client’s racial background.

Just look at this 2020 mortgage approval data from the Federal Financial Institutions Examination Council:

Mortgage approval rates

Are lowest for members of minority groups

Mortgage approval rates

Source: SmartestDollar

As you can see, African Americans had one of the lowest approval rates—at just over 70%. That’s a far cry from the almost 90% figure for Caucasians.

Fintech apps help level the playing field for small businesses by eliminating many of these roadblocks. As a result, the process is faster, approvals fairer, and interest rates lower.

One of the innovations that play a part here is peer-to-peer (P2P) lending, where individuals can lend money directly to borrowers, and it’s done entirely online.

This helps cut down on approval times, reduce application requirements, and generally results in better interest rates because no big bank acts as the intermediary.

Blog 01@2x 2

Source: Finextra

Fintech lending apps can also use data and open banking to instantly gather the borrowers’ financial information, such as their bank statements and utility bills.

This allows lenders to get a more accurate picture of their creditworthiness, leading to fairer approvals and interest rates for both parties.

Indeed, alternative lenders will continue to become the de facto financing source for many businesses and individuals.

As the CEO of Biz2Credit Rohit Arora puts it:

“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.”

It is important to note that lending is a very profitable fintech sector, where 28% of the top 50 fintech companies operate.

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.

Marwan Forzley, CEO of the payment platform Veem, sums it best:

“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.”

That’s why trends like payroll fintech are hot right now. They aim to streamline how businesses pay their employees.

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:

Payroll fintechs landscape in the united states

Payroll fintechs landscape in the united states

Source: Forbes

Robotic Process Automation (RPA) is also an exciting fintech trend with tremendous value when applied to businesses.

It uses bots to execute crucial but repetitive tasks like retrieving reports, managing payments, and even acting as customer service agents through chatbots.

Among RPA users, there has been a 57% reduction in human errors. Cost savings and greater operational resilience have also been noted.

These examples are just the tip of the iceberg.

There are plenty of other fintech innovations, like blockchain technology, autonomous finance, biometrics, and open banking, that can benefit businesses and boost their efficiency.

Payments move faster

Cash flow is the lifeblood of any enterprise, and that is especially true for smaller businesses with limited capital.

Fortunately, this is one area where fintech can have a lot of positive impacts, by automating and speeding up payments.

Nowadays, fast payments aren’t a differentiating factor anymore; they’re quickly becoming a necessity. 

Take a look at this survey of payment habits during the COVID-19 pandemic:

New payment habits used by consumers during covid

New payment habits used by consumers during covid

Source: The Financial Brand 

As the numbers show, customers have been relying on cash less than before while experimenting with digital payment methods more.

This is good news for businesses because cashless payments are fast, which means better cash flow.

The open banking revolution and the rise of digital banks make payments even faster.

A fintech app can connect directly with a customer’s bank to make real-time instant payments possible using an open banking API. 

Here’s what that looks like in a nutshell:

How open apis work

How open apis work

Source: Business Insider 

But speed is just the beginning. Fintech can also make payments more secure.

Protective layers like biometrics and two-factor authentication ensure that only valid transactions are made through the app.

Then there’s the freedom to do cross-border transactions. Traditional payments between countries are cumbersome, time-consuming, and expensive (thanks to exorbitant exchange rates). 

But digital payment platforms can drastically cut the cost of sending money. There are various ways to do this, but the most popular and cheapest is using blockchain technology or cryptocurrencies.

If you’re planning to get into the payment space, PaaS, or payment-as-a-service, is a promising fintech niche.

These platforms provide various payment services to businesses, such as credit card processing, cross-border transfers, and check clearing.

And with a projected growth of more than $18 billion by 2027, the demand for PaaS seems to only rise further.

U.S. payment as a service

Market size by component, 2016-2027 (USD Million)

U.S. payment as a service

Source: Grand View Research

Fast payment is something that every business will need, and that’s a good reason as ever to get into fintech.

Customers stick around longer

If you look closely, all fintech apps have one common goal: to deliver a better customer experience. In fact, it’s one of the biggest reasons why fintech exists in the first place.

Challenger banks, one of the earliest movers in the fintech space, emerged because people were tired of the inconvenience that so frequently plagued traditional institutions. 

A Kearney study backs this up:

What made you choose to use a challenger bank?

What made you choose to use a challenger bank?

Source: Kearney 

As you can see, the ease of use tops the list, showing how accessibility and convenience provided by fintech platforms represent a huge driver for customer loyalty. 

You can apply many fintech innovations to drive customer trust and retention for businesses as well.

For example, incorporating a cashless mobile wallet system in an e-commerce app will significantly speed up payments and improve the shopping experience.

The ordering and payment solutions platform we’ve created for the hospitality industry is another great example.

Partnering with the London SaaS company Bizzon, we incorporated fintech solutions to digitize the operations of hotels and restaurants.

You can read the case study here.

image 5

Aside from increasing customer retention through speed and convenience, fintech also provides customers with personalized experiences through big data and AI.

That means an app can offer products and services relevant to its users based on their past purchases or even their financial standing.

And personalization is a fantastic tool both for getting new customers and retaining them, as this infographic from Bloomreach shows:

The benefits of personalization

the benefits of personalization

Source: Bloomreach

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:

Ways to improve your customer experience strategy

  • Create feedback loops
  • Deliver personalization
  • Empower customer with AI
  • Deliver proactive experiences
  • Use data and analytics

Source: 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:

10 top business risk priorities

10 top business risk priorities

Source: CRI Group

Still, whatever the risk, the first step of managing it is to be aware of it. You can’t fight what you can’t see, which is why visibility should be a top priority.

Fintech can help reveal these risks by giving businesses more analytics capabilities.

Using automation, machine learning, and big data, apps can scour through thousands of data points and provide decision-makers with insights in seconds.

Also, fintech is effective in countering money laundering and other illegal activities, which is one of the top business risks, as the above study showed.

Using regtech, companies can monitor transactions in real-time to identify irregular activities that might lead to fraud.

However, risk management is more than just preventing catastrophe. It can also be a tool for improving the customer experience.

Take the rise of the “buy now, pay later” space, dominated by companies like Afterpay.

These platforms allow customers to get an item first, then pay for it later on an installment basis.

Creating an e-commerce app with similar capabilities and Know Your Customer (KYC) features lets you reduce purchase friction while reducing the overall risk of non-payment.

As we said before, fostering customer loyalty is all about getting users to trust a business with their data.

Unfortunately, it’s getting harder and harder to do that, as the following IBM survey reveals:

The significant gap between data privacy and consumer trust

The significant gap between data privacy and consumer trust

Source: IBM Newsroom

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)

On accounting and payments services ($ in billions)

Source: Forbes

The market for accounting platforms is quite substantial, with businesses spending $135.89 billion on it in 2020.

Combined with other financial service platforms like invoicing and bills, the total market is at a whopping $531.20 billion.

Ready to get into fintech?

After explaining the many benefits of fintech apps, we hope we’ve nudged you enough to create one of your own. 

The truth is, there are so many pain points businesses encounter every day that you’ll never run out of things you can help them with. The challenge now is knowing what to tackle first.

Once you’ve decided how your fintech app will help entrepreneurs and business owners, you need a reputable app developer to bring your vision to reality. 

And with extensive experience in developing mobile fintech apps, DECODE is just the partner you need.

Contact us today, and we’ll be happy to lend a helping hand. 

Written by

Marko Strizic

Co-founder and CEO

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.

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