Dubbed as a financial and digital revolution, FinTech is fast becoming one of the best technological moves firms can adopt in 2020 and beyond. Some early adopters in both startups and big-name firms that have harnessed the innovations offered by FinTech are reaping the benefits from tailor-fit services; their businesses have become more responsive to market realities, and are more agile in adjusting to the needs of both their operations and their market.
Regardless of company size and location, FinTech is the great equalizer. According to an interview by EY Global conducted across 27 markets in six continents with more than 27,000 consumers, 56 percent of small and medium-sized enterprises (SMEs) are using both banking and payment FinTech services. Meanwhile, another 46 percent use financing Fintech services.
What is FinTech?
With the continued development of various banking and commerce solutions, the appetite for FinTech applications has continued to increase. FinTech refers to software and services that help consumers and businesses improve and manage financial operations. Some examples of FinTech include mobile payment applications, electronic lending and credit, wealth management applications, crowdfunding platforms, digital wallets, robo-advice, cryptocurrency, and blockchain technology.
Interestingly, people tend to overlook Fintech and take it for granted on a daily basis. Yet, technical adoption is around us on a daily basis; it is in the QR code scanner our local cafe has at the cashier, which we match to our phone applications to pay for our cup of coffee and doughnut. FinTech also powers the use of online payment methods such as PayPal, Google Wallet, and Apple Pay services.
The impact of technology in finance radiates far and wide affecting both customers and retailers alike. By streamlining services, it enables businesses and operators to better manage their financial operations while providing a platform that’s geared towards client satisfaction and ease of use.
Business challenges that FinTech solves
By making services more nimble and attainable to all, most especially the underserved business and consumer segments, here are some business challenges that financial technology solves:
- Increased financial access: Fintech has leveled the playing field and allowed for greater financial inclusion. Greater access to commerce and banking were previously reserved for the wealthy or those with established economic backgrounds. Fintech now opens financial opportunities for start-ups, entrepreneurs, freelancers, and small-to-medium-sized businesses. With greater financial access comes the widening of these companies’ client base and expansion of potential customers.
- Customer satisfaction: Handling payments and finances is not everyone’s cup of tea – many people find it tedious, unnecessarily complicated, or boring. By providing platforms with interfaces that are simple to use and intuitive to people’s needs, customers will be happier, less frustrated with, and appreciative of the quality of services companies have to offer. This paves the way for customer loyalty and better brand reputation.
- Insurance and improvement of credit scoring: Securing insurance, loans, and other services are all heavily dependent on credit score. This is where FinTech comes in. It allows companies access to forms of insurance that they can leverage on, like home insurance, auto insurance, life insurance, health insurance, and more. As an example, Credit Karma, a popular personal finance firm, offers customers free access to their credit scores, which in turn helps them file their taxes and shop for credit cards and loans. Forbes reported that then start-up Credit Karma, which began in 2007, grew to a valuation of $4 billion in 2019. It has since been acquired by software giant Intuit for a whopping $7.1 billion, reports Motley Fool, and now boasts of 37 million monthly active users.
- Real-time accurate and researched financial advice: Digital platforms like robo-advisors are automated, algorithm-driven financial services that collect information about clients including their financial situation, They also provide optimal scientific investment data. FinTech that provides financial advice can be applied in estate planning, taxes, retirement planning, balance projects, asset allocation, and much more. Business owners use them because they are user-friendly, safeguard their privacy, and offer inexpensive, wealth management services.
- Updated accounting and budgeting: Having a solid budget helps businesses stay on top of their finances and prepare for emergencies and curb overspending. Gone are the days of handwritten expenses and excel sheets of monthly budgets. FinTech provides convenient and inexpensive ways to check, plan, balance, and review your finances and budget. It also gives you a good idea of your current financial situation. One of the most popular budgeting apps currently in the market is You Need A Budget, which advises business owners on how to save more money for the future. Its system works around four rules: the allocation of each dollar, understanding your TRUE expenses, flexibility, and purposeful spending for savings.
The global financial sector is expected to be worth a staggering $26.5 trillion with a CAGR of 6 percent by the year 2022. Moreover, 82 percent of traditional financial organizations are planning to increase touchpoints and collaboration with FinTech firms within the short-to-medium term. The adoption of technology solutions in the financial industries provides out-of-the-box ways to address your business challenges; it will enable you to make your organization stronger and more robust in the long run.