Financial technology (fintech) refers to the type of technology used to streamline, automate, or augment conventional financial services, such as moving money across bank accounts, depositing checks, sending money, paying bills, and applying for financial assistance. It’s also used in crypto exchanges and peer-to-peer lending.
So what does this mean for small business owners? How can fintech help in improving their business operations?
How Fintech Helps Improve Small Business Operations
Fintech helps small businesses scale their operations by providing smart solutions for finance-related matters. Let’s take a look at specifically how:
1. Easy Access to Additional Financing
Small business owners need cash to run their businesses, but it hasn’t exactly been easy for them to qualify for small business loans from traditional lenders. Banks and credit unions tend to view small businesses as risky borrowers due to a lack of credit history or insufficient cash flow. As a result, they often require multiple in-person interactions before approving their loan application. The process can be both lengthy and quite frustrating.
With fintech, online lending companies can simplify and automate the small business loan application process. Small business owners can apply for a loan online using a laptop or a smartphone and receive approval at a much quicker pace than with traditional bank loans.
Fintech powers online business financing platforms like Giggle Finance, Fundbox, and Kabbage, enabling them to approve applications in as little as three minutes. Thanks to Fintech, business owners now have access to more funding options and lenders that could easily provide funding right when they need it.
2. Accounting Automation
Having a clear understanding of your company‘s cash flow allows you to make informed financial decisions like knowing when to invest your money, when to take out a loan, or when you can and should be hiring more employees. Bottom line, there’s a stronger potential for growth and expansion if you properly manage your company’s cash flow.
The 2019 On pay Small Business Finance and HR Report surveyed 1,085 managers and owners of small businesses in the U.S. with at least one employee, and found that 41% handle their company’s accounting and finances themselves.
Whether you prefer to handle this facet of your company yourself, or you can’t yet afford to hire an in-house accountant, fintech accounting software allows you to stay on top of your company’s finances without the aid of a bookkeeper or accountant. Software solutions like FreshBooks and QuickBooks Online includes features to help you organize your invoices, payroll, expenses, and even handle financial forecasts.
3. Make Online Payments Easier
The COVID-19 pandemic accelerated the use of cashless payments, and fintech has made it possible for businesses to offer convenient online payment options to their customers. Top fintech payment companies like Stripe, PayPal, Circle, and Venmo have made online payments more convenient, simpler, and more secure than ever.
Furthermore, fintech solutions like Shopify and Big Commerce have made it easier for small businesses to create eCommerce websites to widen their reach. For instance, Shopify allows you to sell products on Facebook, access credit card payments, and add buy buttons to your websites.
4. Improves Financial Data Security
Data breaches are a serious threat to large and small companies alike, but small businesses are more vulnerable to attacks. The Verizon Business 2020 Data Breach Investigations Report (2020 DBIR) is an industry-standard in evaluating cybersecurity. It analyzed 157,525 incidents and found that small businesses made up 28% of the breaches.
Cyberattacks can cause costly damage to business operations and could taint your credibility, so you need to be hypervigilant in protecting both your company’s data and your customer‘s. Many companies are now using biometric payments where systems can charge a customer’s credit based on fingerprint scans, face recognition, or voice authentication. To protect their own information, business are implementing methods like data encryption or complex algorithms to encode data, and tokenization, where data is turned into random symbols or tokens.
Some fintech solutions to make mobile and online transactions safer include Feedzai, Simility, and Aspiration, among others.
The Bottom Line
Fintech continues to revolutionize the financial sector and empower business owners to streamline day-to-day business operations to serve their customers better. Financial technology is thriving globally, and it isn’t going anywhere anytime soon.
