From inflexible funding requirements to fierce market competition, start-up businesses have many obstacles to surpass before they can reach stability and make a profit. It takes a great deal of ambition and innovation to get over the initial hardships of running a start-up, but, unlike a few decades ago, when entrepreneurs had a limited set of tools at their disposal, nowadays both technological and financial innovations offer a much-needed helping hand. FinTech, which has been dubbed “a paradigm shift in small business finance” in a World Economic Forum report, is a particularly empowering trend. Combining the best in finance and technology, it emerged during the economic crisis and, according to specialists, it will continue to fuel business growth in the following years as well.
Arvind Sankaran, FinTech advisor and banking expert, said that “We’re witnessing the creative destruction of financial services, rearranging itself around the customer. Who does this in the most relevant, exciting way using data and digital, wins!”
This customer-centric approach brings good news for start-up owners, who often have trouble keeping their businesses afloat and managing financial inconveniences.
Below are 5 key benefits that FinTech offers start-ups and micro-organisations:
1. Flexible lending solutions.
There was a time when entrepreneurs had to undergo rigorous screening prior to acquiring a loan. The process involved numerous visits to a local bank, filling in tonnes of paperwork, providing lengthy documentation and waiting for days only to receive a “denied” notice because their case wasn’t strong enough.
Fintech changed the rules of the game by streamlining the application process. Instead of seeing several bank representatives in person, entrepreneurs can now fill in an application form and receive a reply within 24 hours, or they can use loan calculators to find out if they are eligible. In addition, FinTech lending criteria tend to be more flexible compared to banks, which often consider the credit score alone. In other words, if the traditional banking system caters more to the big players, FinTech favours small and medium sized businesses.
2. Modern payments.
A 2017 analysis of the European Central Bank revealed that non-cash payments are on the rise in the EU, increasing by 8.5%. For businesses, accepting cash-only payments is no longer a viable long-term strategy, so they need to explore online, mobile and card payments as early as possible. If the payment infrastructure offered by banks is oftentimes expensive and difficult to implement by start-ups, who lack the resources of established businesses, thanks to FinTech, they now have access to flexible payment options and can compete directly with larger competitors.
Even freelance contractors can set up mobile payment systems with low payment handling fees. Several FinTech companies provide additional assistance in the form of fast-track programmes. For example, Visa recently partnered with Contis Group to help UK-based start-ups have access to contactless Visa debit and prepaid cards and current accounts complete with IBAN, Faster Payments and Direct Debit functionality.
3. Increased security.
Accepting online and mobile payments is a sure-fire way to gain more clients, but also increases the risk of cybercrime. For start-ups, securing all transactions and client data used to be very challenging, because they had to invest in extensive cybersecurity infrastructure. Now, cybersecurity is part and parcel of FinTech and micro-organisations can finally afford it.
Thanks to the latest innovations in tech, security measures such as voice recognition and fingerprint scanning are now common and reduce the risk associated with transactions. As the E.U. is trying to build a sustainable regulatory environment for FinTech, security is expected to become even more sophisticated.
4. State-of-the-art tools.
Innovation is at the heart of evolution. Start-up owners who want to take their businesses to new heights now have access to a vast pool of Fintech innovations that give them room to grow. One major example is AI, which has had a major impact on financial services and helps entrepreneurs take strategic decisions based on accurate data.
Similarly, the rise of Insurtech provides insurance companies with modern features such as digital brokerage and product comparison. Other FinTech innovations that are worth a mention include crowdsourcing apps, payroll software and accounting tools.
5. Better customer experience.
Last, but definitely not least, Fintech has redefined customer experience. FinTech companies have understood that retaining old customers is just as important as gaining new ones, which is why they stand out through streamlined UX and UI. Focusing on transparency and efficiency, FinTech uses AI and analytics to deliver bespoke user experiences every time and make every interaction count.
For example, automated text chats and chat pots can help small businesses offer quality support for smaller issues and get more time for the ones that can only be solved by human personnel. Even complex tasks such as fraud detection and claims management can be automated, saving time and money.