How Fintechs Support SMEs
The term fintech refers to the industry that uses technology to provide financial solutions to its users. They have been around since the late 90s when people started trying to move money around the Internet, but have now expanded to provide traditional banking services like loans and even insurance. For SMEs around the world, they offer a more flexible and less expensive alternative to traditional banks.
Access to loans
Fintech companies make taking a loan less intimidating for SMEs that are starting with little in the way of financial history. Many of them demand no collateral from their clients, which can be a significant roadblock to small businesses that need loans at the beginning to maintain cash flow. Thanks to technology, funds are transferred to their client’s account more quickly upon approval. Some Fintechs factor in things like social reputation to determine whom they can trust, a criterion which doesn’t carry the same weight with some traditional lenders. To cap it all off, many of these services are borderless, providing access to people that would otherwise not have it.
The uncertainty of their needs makes it harder for businesses that are still exploring the field to plan. SMEs need quick access to cash to solve problems or take advantage of opportunities. Fintechs are ideally placed with their flexibility, willingness to lend to novices, flexible repayment options, cheaper rates, and faster loan processing from the time SMEs apply to when they receive loans.
Fintechs are the backbone of the modern economy with infrastructure for the smallest of businesses to send and receive money. Every SME that is looking to sell online needs some form of technology to process payments. PayPal, the most significant player in this sector, has been rivalled by new services like Stripe, Transferwise, Adyen, and Alipay. The payment solutions league also includes services traditional banks make available to move money across borders and the new world of, which makes it possible for users to send money directly to other users. Fintechs are helping SMEs connect their online transactions with their traditional bank accounts and mobile money, which further improves their reputation in their physical environment.
Moving ones and zeroes across the planet have the consequence of building a foundation that gets better with every single transaction. This is further enhanced by machine learning to create a more efficient system. At the core of these financial solutions is the technology that makes the transmission of information faster, and some of these providers are making this available to SMEs as tools to better manage their businesses, diversify their portfolio through investments and budget with ease. Some of these Fintechs give SMEs access to forecasting, billing, and point-of-sale software on the same platform. Blockchain technology, which is used in cryptocurrencies, has transformed shipping and eCommerce, helping SMEs move and track their products across the world more efficiently.
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