5 Ways FinTech Helps Small Businesses Better Manage Their ‘Money Matters’

FinTech is an umbrella term that encompasses the myriad innovative ways technology is used to design, deliver and transform financial services and solutions around the world. Although it has not made traditional financial firms completely obsolete, FinTech is revolutionising the global financial landscape by forcing traditional firms to review their outdated business paradigms and come up with solutions that are more effective, more customer-centric and less expensive.

Many of these solutions are based on cutting-edge technologies like Artificial Intelligence, Blockchain and Deep Learning that enable financial services firms to collect rich swathes of customer data, deduce usage patterns and even replace human intervention.

This convergence between Finance and Technology is ushering in a new era of transparency, efficiency and inclusivity that is reshaping customers’ expectations and setting higher standards for user experience and satisfaction.

In general, the term FinTech can apply to any useful invention or innovation that can improve or optimise the way people operate their businesses and conduct their financial transactions. A few such useful products and services that are redefining financial services include:

• Fund transfers and online remittance tools (domestic and international)
• Mobile wallets
• Online payments platforms
• Insurance aggregators
• Automated investment management advisors
• Peer-to-peer (P2P) lending and crowdfunding tools
• Financial assets trading platforms

In the global marketplace, small businesses face a number of challenges and operational barriers and therefore, need all the help they can get to survive – and even thrive – among the ‘big guns’.

Through the effective use of FinTech, these firms can better manage their cash flows, working capital and international payments, save money, maximise their overall performance efficiency, design tailored products for customers and build better customer relationships.

Some of the ways FinTech firms are acting as game-changers for small businesses include: 

1. Easier Business Loans

Even just a few years ago, there were a limited number of funding avenues available to start a new business. One of the most common was to approach a bank, a lending institution or investors to borrow money on interest. The amount that was lent depended on a number of factors including the borrower’s creditworthiness, firm’s activity profile, market/industry conditions, lender’s lending capacity, etc.

Traditional lenders are generally not keen to lend to small businesses because the loan amounts are too small to pique their interest and also because such firms’ activities and earnings are considered ‘inconsistent’ and therefore, risky. In addition, the loan application process itself is often cumbersome, time-consuming and mired in bureaucratic red tape.

Now, thanks to FinTech, small businesses can bypass these conventional methods to get loans for setting up, scaling up and operating their businesses. Through innovative use of technology, FinTech is bridging the funding gap between small business borrowers and potential lenders and thus making the business environment more dynamic and vibrant. Peer-to-Peer (P2P) lending platforms and crowdfunding portals directly connect borrowers with potential lenders. As a result, borrowers get access to capital at lower interest rates than bank loans and lenders can earn income – a win-win situation all around. 

2. Simplified Payment Systems

For any business to survive and thrive, it must have an efficient money management system. Through this system, it should be able to collect payments on its invoices, failing which it runs the risk of suffering a loss of revenue (and thus profit) and of accumulating bad debts. In the long run, this may make the firm’s operations unsustainable. The firm must also be able to pay its creditors, staff, vendors and suppliers. A failure to do so may have legal repercussions and may also negatively impact its reputation in the marketplace.

In the pre-FinTech world, payment and receipt processes were difficult to manage, took a long time to complete, and were mostly cash based in countries with weak financial infrastructures. In addition, the presence of geographic boundaries meant that cross-border money transfers and payments were also immensely expensive. FinTech has changed all of that and made these issues almost redundant. The marriage between financial services and technology has led to the creation of online and mobile-based payment systems that enable firms to collect payments on services rendered to clients, and also to make payments to vendors/suppliers for services received, regardless of location or currency. 

3. Profit Maximisation

With the rise of FinTech, the infrastructure around capital markets has undergone rapid changes, particularly in the way technologically-enabled platforms have appeared in traditional over-the-counter-type markets. This ‘electronification’ of hitherto OTC products has been driven both by the post-financial crisis regulatory environment (e.g. Sarbanes-Oxley, Basel III, European Securities and Markets Authority) and by the potential advantages of economies of scale.

Regardless of industry or type of firm, the latter usually brings down costs and may also increase revenues and eventually profits. The bottom line is that the amalgamation of finance and technology has led to the creation of trading platforms that collect and analyse user and market data in order to uncover trends, provide aggregated market views, make forecasts and increase the profit potential of traders and firms. 

4. Account Management Tools

Needless to say, every firm that aims to thrive in the years to come must be able to control its costs and expenses, improve its revenues and ultimately increase its profits. If a firm is not able to pay its employees’ salaries, pay its vendors, collect on outstanding payments from customers or invest in assets/inventory, it will not be able to survive, let alone thrive.

Because of financial technology, small businesses now have plenty of options to help them do all of the above and more. Online accounting systems are now available to monitor their cash flow in real time and ensure that their operations are running smoothly.

Expenses and invoices apps – many of them free – enable firms to track their expenses, find ways to reduce costs and raise invoices with customers on time. In many ways, FinTech takes the guesswork out of running a business and makes it less cumbersome so that small business owners can stop worrying about the little details and focus more on growing their business and customer base. 

5. Transparency

Thanks to the growing penetration of the Internet and mobile telephones in almost every corner of the world, FinTech firms are highly motivated to create financial solutions that utilise the power and usefulness inherent in these technologies.

Traditional banks charge hefty fees for funds transfers which over time can add up to substantial losses for the parties involved. FinTech-created mobile and online banking solutions not only reduce the cost of transferring funds between parties, but also reduce the need for using paper currency for financial transactions. This makes the financial system of a country more transparent because a move towards ‘cashlessness’ tends to stifle crime (which is a ‘cash-only’ business), prevent tax evasion and open up the ‘shadow economy’. From the standpoint of firms, it also makes the business ecosystem more robust and therefore more competitive.

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Customers and clients are the backbone of almost every business in the world. End users are happy because FinTech solutions offer intuitive product designs, ease of use and 24X7 accessibility. They also minimise human ‘middle-man’ intervention and speed up transaction processes. And firms are happy because such products and services enable them to quantify and mitigate their business risks, broaden their customer base and design tailored products for their customers. In other words, FinTech helps small businesses improve customer acquisition, engagement and retention, and thus increases their revenue and profit potential.

As mentioned earlier, one of the biggest challenges all up and coming businesses deal with on a regular basis is managing overseas payments and one Fintech start-up that’s changing the overseas payments landscape is Instarem. 

The Singapore-based company is a fast-growing global remittance/online payments firm, which is at the forefront of the global FinTech revolution. With its broad network of 8000+ banks in 55+ countries, InstaReM provides a fast, reliable and low-cost option for cross-border money transfers. It also offers secure online data access, easy reconciliations, short transaction timelines and hassle-free transfers.

For businesses, InstaReM provides a robust institutional platform, MassPay. With this configurable solution, firms can easily manage and control their high-volume remittances to multiple beneficiaries and in multiple currencies. With MassPay, users can bypass banks’ high currency conversion costs and gain better exchange rates and thus avoid incurring potentially large losses due to market and currency volatility.

Its innovative solutions enable small businesses to manage and control their payments to multiple beneficiaries in multiple currencies. Thus, InstaReM helps firms improve the efficiency and profitability of their operations and maintain their reputations as reliable business partners.

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