How fintech helps SME Business
Recently I have been asked by SMEs and manufacturers why they should care about Fintech? So many of the tangible benefits get lost in lingo and are trapped in the London bubble. In this post I’m going to write a little on the real difference fintech is making now in 2017 and in a later post I will discuss how some of the emerging technologies such as AI /deep learning and distributed ledger technology will help.
Financial technology otherwise known as ‘fintech’ applies technology, both software and hardware to financial services so as to offer improved financial services. On a commercial level fintech is about lowering the cost, increasing speed and increasing information flow to improve user experience. This is empowering SMEs to take more control of their finances.
In 2016 there was $17.4 billion of fintech investment worldwide and £743 million in the UK. Over Q1 of 2017, the UK accounted for half of the top ten European investments in fintech companies. The UK is endowed with a natural advantage for fintech due to government support, high level of entrepreneurial talent and the prioritisation of innovation. London dominates but cities like Edinburgh, Manchester and Belfast are also increasingly involved.
So where are we seeing changes in SME business?
Fintech is growing through financial management, borrowing, banking and credit analysis. There are a number of catalysts that are enabling the exploitation of fintech:
The Cloud – Cloud computing refers to computing services delivered over the internet and hosted on a personal network. These servers are used to access and analyse data through dashboard views and predict solutions based on analysis.
Algorithmic Decisions – Companies are now using algorithms or ‘algos’ to analyse and act on data. This saves time and prevents human error. SMEs like Acorn Machine are pioneers in lending based algos.
Pro Innovation Regulator – The Financial Conduct Authority (FCA) has placed innovation and technology as a main priority to ensure competition. This has encouraged a forward-thinking approach to finance.
Data Availability – Fintech platforms pride themselves on using large amounts of data to assist SMEs with alternative finance. Data is employed in order to lend to SMEs to a) assess and manage risk, ensuring that prospective customers banking status and history are both in order. b) combat fraud by allowing SMEs to decide whether a potential customer is in fact who he or she claims to be, preventing liability and loss.
Below are some examples of fintech companies whose offering has been embraced by the SME market.
Xero is an accounting cloud based solution for small business. Founded in New Zealand in 2006 Xero is a $3.5 billion (£1.9m) company with $300m (£163m) of revenue. SMEs can easily keep track of expenses as using the Xero cloud software allows them to work anytime, anywhere on any device. Xero integrates with your bank account and provides reconciliation, effectively making the role of bookkeeper redundant.
MarketInvoice allows SMEs to receive cash in 18 hours against their invoices. This is achieved by allowing the SME to take control of their cash flow by selling invoices online.
Factoring has been around for a long time but its technology that gives it the thrust to really become mainstream. MarketInvoice finances over £15,000 every minute and as of October 2017 they have funded over £1.5 billion. Better yet, they provide investors with the expected return 100% of the time.
TransferWise is an online money transfer service that disrupts banks by offering pure peer to peer foreign exchange. Covering B2B and B2C, TransferWise offers an efficient and professional user experience. The site will also save you a truck load of money. PCM research found that when transferring 2,000 euro you pay a total of £19.50 with TransferWise, compare that to £69.36 with a £25 fee when using Santander.
Telleroo is a modern, user-friendly solution to the bulk payments service. Real time payments can be processed and tracked 24 hours a day through an online dashboard. Telleroo focus on fast customer service through online chat tools which sustains a first-rate user experience. The platform’s agility makes it very valuable in the gig economy.