Over the past few years, we have seen a significant shift in how we do business. This shift is known as Fintech or financial technology. It has the potential to transform in many ways, whether it's through its effect on financial services, banking, economic development, or inclusion. Fintech has also changed the way we interact with banks and the way banks interact with us. And it's changing the way people do business. So let's dive deeper to understand how Fintech is impacting business.
What is Fintech
Financial technology, or simply Fintech, is a technology that provides consumers with new ways to manage and spend their money. Compared to traditional financial services, Fintech stands out by being:
- more secure
- easier to use
Fintech is often referred to as a "disruptive technology," meaning it could change the way people do business and interact with their finances. It has been most successful in the banking industry, allowing for more transparency and accessibility of banking services. It also allows for faster transactions, lower fees, and greater convenience.
Financial technology is not new, but the massive Fintech impact on business has become apparent. Fintech has an influence on how businesses operate and how consumers take care of their finances.
The Fintech industry is now focusing on different aspects of finance, starting from automating processes of banks and funds, developing new ways to process, transfer and manage money, enabling faster and more secure payments for e-commerce.
The global Fintech market value was more than $110 billion in 2020, and it should reach almost $700 billion by 2030, growing at 20% per year.
How Fintech can help small businesses
While more than twenty years ago, Fintech had a significant impact on primarily enterprise companies and financial institutions, today, even the smallest businesses can benefit from it.
Fintech has enabled small businesses to open an online store and sell their products and services to broader audiences. Platforms like Magento, Shopify, Squarespace, and many others allow entrepreneurs to set up their online stores within a couple of days.
Second, there are several behind-the-scenes benefits for every type of business. These benefits are not visible to the ordinary customer, but they enable better operational and business processes, so today, we can enjoy an array of shops and products.
The benefits include:
Easier payment processing
Enabling wireless payments is a must for brick-and-mortar stores in many countries. For example, in the Netherlands, there are places where a customer simply cannot pay with cash. There are prejudices against wireless in many countries, but as time passes, more and more people will switch to it.
Wireless payments are not only more effortless to use for the end customer, but they also ease accounting for the business. Counting cash might be an enjoyable task, but it makes accounting a hassle and still takes time.
Lower transactions costs
One of the enormous benefits of Fintech is the reduced cost of transactions. Fintech has been able to reduce transaction costs by as much as 10% in some cases. Fintechs can provide services at a much lower cost than traditional banks because they don't need branches or other physical infrastructure. Lower transaction costs are often achieved through automation and digitization, which reduces overhead costs.
Many startups in the Fintech industry have offered low-cost payment services with significantly reduced fees. This can be done by automating administrative tasks or using digital currencies like Bitcoin that don't require a third-party intermediary.
Better risk management
Better risk management is enabled by data analysis techniques and AI that allow companies to identify patterns in customer behavior or market trends, allowing them to make more informed decisions. When it comes to risk management, the idea is that people will have more information at their fingertips about how they can protect themselves against risks in the market, as well as what they should do if something goes wrong with their investments.
Digital currencies like Bitcoin allow customers to hold their own money without a bank account. If you lose your laptop or phone, you can still access your funds with another device.
Transparency and security
Transparency and security are provided by blockchain technology which is used by many Fintech companies to secure their data because it cannot be hacked as easily as traditional databases.
Transparency means all information about the account will be available on the phone. This can be helpful if you need to call customer service for an issue with your account or need to know how much you have in your checking account when shopping online.
Security also plays a significant role in Fintech as these accounts are not linked to personal credit scores like traditional bank accounts are, which makes them less risky. It also provides consumers with a much higher level of protection against fraud and cybercrime due to the blockchain technology, which is used by many Fintech companies to secure their data because it cannot be hacked as easily as traditional databases.
Accounting, tax, and monitoring
The times when small businesses had to keep their accounting records in a literal book are long gone now. Modern Fintech solutions offer a variety of software for automated accounting. While it will cost a business a fair amount of money to set it up and then service it (on par with hiring an accountant), it allows to streamline accounting processes and saves a lot of time.
Accounting software is a complete game-changer for people who want to start a business, but even thinking about accounting and taxes makes them reluctant. Combined with other Fintech services, business owners often don't even need to do the slightest input – the software processes every transaction automatically.
Here's a shortlist of the most popular accounting software out here:
Sending money to another domestic company or abroad isn't new, but Fintech enabled fast and secure payments without visiting a bank. Another benefit is that there are no additional costs when using the app for money transfers instead of going into the bank. Last but not least, some apps may offer better exchange rates than what you would get at the bank, which means businesses are getting a better deal.
How is Fintech changing financial services?
Many talks are going on about Fintech business models and how Fintech is changing the financial services industry. But what does that really mean? And what are the implications for businesses and consumers?
In the financial services industry, Fintech is a game-changer. The changes that have been happening are massive, and they're not slowing down anytime soon.
Fintech is changing banking - from how banks operate to the way people think about their money. Firstly, Fintech has made banking more accessible and more enjoyable due to the great Fintech UX design. With apps like Venmo or PayPal, one can easily send money to friends and family without going through your bank account or credit card company - making life easier for everyone! Many new online banks offer better rates on checking accounts than traditional brick-and-mortar institutions.
Banks have been using traditional methods to provide their customers with services such as loans and checking accounts for decades, but Fintech has changed that. More people are turning to Fintech rather than banks because they find it more convenient, faster, and cheaper.
And it's not just banks that are feeling the heat; Fintech is also changing how we invest our money, spend our money and manage our finances. No matter your age or income level, Fintech can help you save more, get better loans, and make smarter decisions - all with one simple swipe on your phone or computer screen. Fintech is also changing how lending works by making loans available to a broader range of borrowers. Small businesses are seeing benefits from this new technology as it provides easy access to funding sources that were previously unavailable.
Fintech App Development
The popularity of Fintech app development is a question many business owners ask themselves. It seems like every day there's a new app that needs to be created. So Fintech apps offer an excellent opportunity for startups who want to break into the market with innovative ideas.
Fintech app development is creating an application that provides financial services to customers using technology. This can include anything from mobile banking, personal finance management, or investment advice. Fintech app developers can create applications that are tailored to meet customer needs based on their feedback and data collected by the developer. Read about how to develop a secure Fintech app in our blog post.
Fintech app development depends on the goals of the company and its target audience and how much they want to spend to achieve those goals. Services range from simple mobile app designs to full-blown enterprise solutions with custom hardware integration. For example, an investment management app might not require complicated interfaces or complex calculations, whereas a money transfer app would. The costs of development and how long it takes to develop a Fintech app vary greatly depending on what you need to do, but it's always important to have an idea of your budget before you start shopping around for services.
Future developments of Fintech business models
With the rise of cryptocurrencies and blockchain, new possibilities for small businesses might arise in the upcoming years. Some small businesses already accept payments in crypto, but we are eager to see what future Fintech developments could bring to the table.
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