- The Rise of the Fintech Industry
- Innovative Fintech Products and Services
- What is the Fintech Industry’s Impact on Business Financing?
- Fintech and Small Businesses
- Future Trends in Fintech and Business Financing
In recent years, the rise of fintech solutions has been nothing short of meteoric, with innovations like digital banking, online lending platforms, and personal finance apps officially ushering in a new era of financial services.
But it isn’t just customers who benefit. The revolution also presents an immense opportunity for businesses. Organizations that leverage the wide-ranging applications of technology in finance gain advanced financial management tools, expanded access to capital, improved efficiency, and reduced costs.
And it doesn’t end there. The fintech industry is always evolving, with firms employing the latest technologies in finance to develop more innovative solutions.
What does the future of financial technologies hold in store? And, how is the fintech revolution impacting business financing? Let’s take a closer look.
The Rise of the Fintech Industry
Despite its association with modern cutting-edge technology, the groundwork of fintech was laid in the late 19th and early 20th centuries, with innovations like the transatlantic cables and the world’s first electronic money transfers.
Over the years, technology in financial services has evolved significantly, marked by milestones such as the invention of the credit card in the 1950s, the introduction of ATMs in the 1960s, and the launch of PayPal in the 1990s.
The current stage of the fintech revolution, however, is said to have begun in 2008, when the traditional global banking system was on the verge of collapse, and fintech firms saw an opportunity to capitalize. Brick-and-mortar stores made way for more advanced digital solutions, and the way we deal with money hasn’t been the same since.
In the last decade or so, we’ve seen technologies like blockchain, Artificial Intelligence, big data analytics, and cloud computing drive the growth of fintech from a humble wire transfer to the multi-billion dollar industry it is today.
Innovative Fintech Products and Services
Given the relatively fresh history of fintech, it’s impressive to see how quickly financial technology in banking has evolved. Consider some of the most crucial products and services the fintech industry offers us today:
Digital Wallets
Since the launch of PayPal, e-wallets have made financial transactions easier. But it’s not just convenience — digital wallets offer customers more security and more flexibility to business owners. It’s no wonder then that by 2020, digital wallets were the most popular payment method, used in nearly half of all e-commerce transactions.
Open Banking
This financial services technology allows third-party services to access a customer’s shared data (with their consent). The information, in turn, enables businesses to offer more personalized services as well as streamlined internal accounting and compliance processes. It also gives firms everything they need to apply for business funding.
Robo-Advisors
The rise of fintech has also brought with it tools that can help automate the investment process. Robo-advisors, for instance, use advanced algorithms to analyze an individual’s current finances, assess their goals, and offer relevant investment advice.
RegTech
This subset of fintech helps financial firms use technology to navigate industry regulations more effectively. With this innovation, organizations can ensure compliance with enhanced efficiency, speed, and adaptability.
What is the Fintech Industry’s Impact on Business Financing?
While these products and services have a massive impact on individuals and institutions, one of the most prominent benefits of fintech comes with regard to business financing.
Traditionally, the only way to secure business loans was by making extended visits to a bank, signing off on mountains of paperwork, and meeting strict eligibility criteria. But today, technology-driven lending companies offer businesses a more convenient route.
Consider some of the following benefits of fintech lending solutions:
- Faster Processing Times: Fintech companies use advanced AI-powered technology to approve loans faster than ever — often within a day.
- Lower Costs: Due to intense competition, fintechs maintain competitive rates and often provide cheaper options to get a small business loan than traditional banks.
- Less Bureaucracy: Fintech lenders significantly reduce the paperwork required to secure loans. Many offer online application forms that can be filled in minutes
Fintech and Small Businesses
For small business owners, the impact financial services can have on operations is even more prominent. The evolution of fintech has, for instance, offered companies streamlined payment processing solutions, cloud-based accounting and bookkeeping software, and tools to help monitor revenue, expenses, and cash flow in real-time.
Most crucially, however, it has offered small businesses a host of alternative financing options. Consider just some of the following fintech lending solutions:
- Merchant Cash Advance: Allows small businesses to access capital in exchange for a percentage of future sales. MCAs can be issued in as little as 24 hours, and are best suited for businesses that process a lot of debit and credit card transactions.
- Invoice Factoring: This financing option allows businesses to sell pending invoices to the lender in exchange for the net amount in cash. Once the money has been repaid, the lender sends back the difference minus a small fee.
- Business Line of Credit: Gives businesses the flexibility to access capital as and when they need it, without having to deal with the headache that comes with a fixed term loan. The only limitation is a predetermined credit limit.
- Collateral Business Loan: Small businesses that need low-cost capital for a short period of time can opt for this secured loan. By offering real estate as collateral, businesses reduce the lender’s risk, and, in turn, the cost of the loan.
For businesses that don’t otherwise qualify for traditional loans, these alternative financing avenues are crucial. What’s more? As opposed to traditional banks, fintech companies use novel credit assessment methods, allow small businesses with poor or insufficient credit history to opt for high risk business loans, and leverage advanced technology to streamline the process — from application to disbursement.
Future Trends in Fintech and Business Financing
As the financial technology industry continues to evolve, growth is inevitable.
The first thing we can expect is that fintech services will focus on further easing the process of business financing.
While various companies already offer multiple funding options, emerging technologies, like blockchain and the ever-expanding applications of artificial intelligence, will result in even more benefits — including quicker approvals, personalized lending options, and enhanced credit and risk assessment models.
As some reports have pointed out, there is even potential for financial institutions to offer lower rates or better terms to businesses that promote sustainable practices.
However, this future will also bring with it a unique set of challenges, which must be addressed appropriately. A strong regulatory framework can help ensure a level playing field, enhance security, enable growth, and foster a healthy fintech ecosystem.
Conclusion
Clearly, the fintech industry has come a long way, from introducing the first credit card to enabling businesses to access crucial capital within hours. With loans getting more expensive and harder to obtain, fintech financing solutions have proven to be a lifeline for small- and mid-size businesses looking to apply for business funding.
If you’re an entrepreneur looking for help to secure a business loan in BC, Toronto, Scarborough, Alberta, or anywhere else in Canada, don’t hesitate to reach out to Greenbox Capital — a fintech leader that offers several small business funding options tailored to your needs. Many of our loans, which range from $3,000 to $500,000, are disbursed in a single business day. So what are you waiting for? Reach out to our team today.
Sources
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