How fintech is changing the business landscape for small businesses


Over the last few years, the financial sector has experienced significant transformations through what is commonly referred to as Fintech.

These advancements are quickly changing how cash flow and funding occurs in small businesses.

The business owners are experiencing a shift that is making it easier to run the startup since the tech facilitates efficiency and collaboration. When implemented, Fintech is set to help businesses grow at a faster rate and take a bigger share of the market segment. In this article, you’ll learn how the innovation is impacting the small business sector.

Dealing with information asymmetry

For a long time, small businesses have struggled with insufficient capacity to maintain complete and updated profiles as well as keeping wholesome financial records. This is mainly because the traditional methods are not sufficient in the light of most unique startups. This means that bankers can’t grasp the whole picture of a small business because there are several disconnects in the way information is relayed and presented.

But when the system is digitized, startups can formalize their records and tap into online records of payments and supply chains thus making the financial institutions to view in a new light. With these advancements, credit opportunities expand exponentially since there is more transparency and available data is sufficient for future prediction and analysis.

It’s becoming easier to accept payments globally

Prior to the rise of Fintech, small business had to seek the services of a major credit company that allows them to accept payments from overseas. In addition, a fixed landline is a necessity when making a sufficient connection with the bank in question.

But with the current innovations in the financial sector, the process has become relatively easy and cheap. For instance, the payment solutions available through Stripe or PayPal only require a small but secure card reader to handle the payments. In addition, these card readers are provided to merchants for free. at the same time, making transactions through your smartphone means that any customer can pay for products despite their location.

The lending process has become relatively easy

Every startup founder who has attempted applying for a traditional business loan knows the underlying challenges in the lending process. Normally, the common pressure points are speed as well as difficulty in approvals.

However, the advanced innovation has changed all this by eliminating the challenges previously experienced during application, processing and cash loan approvals. When you use digitized lending platforms, there is minimal need for credit scores during the approval decision. If they want any piece of information for verification and underwriting, the technology helps to access it instantaneously.

This implies that startups are getting the required funds within a short time. The efficiency provided when making lending scenarios has effectively facilitated the smooth functioning of peer to peer lenders. At the same time, invoice factoring has received a makeover and small business owners can rely on several options for credit offers.

A shift to cash flow based lending

For a long time, startups have been wrestling with landing options that rely on collateral. Basically, the issues facing these businesses are heavily leaning towards availability of cash flow since their working capital tends to be higher.

Since most startups operate with huge receivables, the Fintech technology has brought the rise of e-invoicing which makes it possible for financial institutions to access credit based on their receivables. In general, when a platform is linked to the payment system, it’s easy for lenders to review the prevailing situation for any business that seeks some funding. Most importantly, this will ensure that more startups survive longer unlike the situation in the past.

It brings about the ease of overseas business

Before the financial innovations made things easier, small businesses had to part with high amounts of money in form of charges from banks every time they made overseas money transfers. Basically, there wasn’t a feasible way around the hurdle.

As Fintech evolves, it has introduced peer to peer services that allow exchange transactions between individuals in different countries around the world. As a result, the cost of making the transactions has become lower and businesses can comfortably make overseas trading.

What does the future have for Fintech

This is definitely a popular question between business owners and investors alike. If you ask any financial expert who is proficient in financial trends, they will be quick to tell you that this financial invention is all about creating smooth payment options.

Ensuring frictionless payments has been and still is the main objective of the revolution. This can be demonstrated by the multiple startups focusing on offering easy and convenient payment solutions.

The transparency facilitated by the blockchain technology continues to attract stakeholders to the invention. This means that it is one of the technologies that will impact businesses on a very large scale. When all the technologies that are currently being developed are finally perfected, businesses will experience the ease of doing business.

Final words

The vast opportunities that have opened up as a result of Fintech innovation cannot be overlooked. For most small businesses, it’s now possible to serve more customers while spending less money than they used to pay when working with previous management models.

As such, it is quite important for small business owners to keep track of the advancements happening in this industry since it affects them directly. However, this also means that the level of competition has risen and you must do your best to keep up with the competition.