Fintech is the technology of finance. Fintech innovation enabled online payments, instant loan mobile apps, online banking, and many other financial services through software and the internet. Fintech technology has begun a new era of efficient and transparent procedures to include small entrepreneurs in their financial requirements.
Fintech has raised the bar forever in terms of customer satisfaction in front of the traditional banking system. Following are the top 5 ways in which fintech is proving to be a boon for small businesses:
1. Easier Small Business Loans
Banks tighten the lending criteria for a small business loan. Thus it has become highly tiresome to get a loan for small businesses through traditional banking systems. Fintech companies came forward to fill this gap. They don’t demand proven track records and don’t have red tapes like banks in India.
They analyse customer behaviour through AI data analysis and use credit scoring for deciding on the loan. Also, the digital process of fintech technology is quicker and more seamless rather than conventional paperwork.
2. Simplified Payment Systems
The payment systems in pre fintech era were primarily based on human efforts of paperwork and bookkeeping. Any error in these transactions used to result in revenue loss or legal repercussions. Fintech innovation came up with online payments, which can be done even from a mobile. This made it easier for small businesses to take payment for their services from clients. And pay timely to their vendors with negligible chance of error.
3. Less-Costly Overseas Business
When Fintech innovation didn’t take place, the receiving of any payment from overseas was very expensive. Thus cross-border business was not easy for small players. But after fintech came into existence, there was no need to pay hefty fees to credit companies. It has revolutionised overseas business with an easy and cheap money transfer from anywhere in the world.
4. Profit Maximisation
Fintech technology not only aids in financial transactions. It also brings to the table market analysis, customer behaviours, & trade forecast. All this data is now available on the tip of your finger. In the past, the expense to collect this data used to eat a considerable chunk of profit. Thus profit margins significantly increased for small businesses because of fintech.
5. Customer Analytics& Credit Worthiness
The fintech technology can integrate different data of the same customer on one platform. This makes customer analytics simpler for banks also. Earlier, it was difficult for banks to incorporate the customer’s legacy in one place. With the data provided by fintech, financial companies and banks can now analyse the customer’s behaviour accurately through machine learning. Thus, lenders can provide loans according to the borrower’s creditworthiness.
To Sum Up!
It will be too early to say that financial technology can replace the traditional banking system. The stronghold of banks won’t let it happen shortly. However, banks are also now integrated with fintech in some ways. Whatever growth occurs in the sector of fintech technology in the future is defiantly going to be beneficial for small businesses.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].