You may have listened to the relatively new term “FinTech” bandied about, but what is it? And why is it essential for all entrepreneurs to understand and know about?
FinTech means Financial Technologies, and in its most general definition, that is exactly what it is: technologies applied and used in the financial services sector, chiefly utilized by financial institutions themselves on the backend of their businesses. But, also, FinTech is coming to represent technologies that are disrupting traditional financial services, including asset management, mobile payments, loans, fundraising, and money transfers.
Do not assume that FinTech is simply a fad or buzzword: Accenture recently delivered a report which found that investment in Financial Technologies around the world has grown dramatically from USD 930 million in 2008 to more than USD 12 billion by early 2015.
And this is likely only to proceed to grow, as FinTech touches not just the financial services sector, but all business the financial services industry deals with. FinTech startups are small and sharp, able to disrupt the lumbering behemoths that are traditional financial institutions and innovate quickly, and your business can use that to your benefit.
How FinTech is changing your business
It used to be that if you desired to begin a business, you would go to your local bank to request a loan or seek out a traditional investor. If a company required to accept credit cards, it would need an account with a big credit provider not to mention a landline and heavy equipment. But this is no longer the problem.
FinTech like money transfer, mobile payments, and crowdfunding services is revolutionizing the way small businesses start up, accept payments, go global, and they are performing it easier than ever to begin and run a business.
Can not find an investor for your big idea? Do not have the credit or collateral to get approved for a traditional loan? That is OK: Crowdfunding now means that you can raise money cheaply and quickly from people all over the world that you have never met. It has democratized the process of discovering startup capital and shortened the timeline from reasonably months of conferences to as little as a few weeks.
It is also now easier than ever for small businesses to accept payments. Even the farm stands in the middle of nowhere can accept credit and debit cards with tools like Square and PayPal. And while there are fees, the entrepreneur does not have to do a particular volume of business to qualify for an account. Anyone anywhere can safely and efficiently accept credit card payments, making it easier to do business.
But what about going global? International money transactions — which have long been a difficult issue for entrepreneurs — are getting more leisurely as well. For smaller transactions, services like PayPal automatically change currencies, so it is easy for a customer in America to buy goods from a maker in the UK or anywhere else in the world. Additionally, a service called TransferWise is streamlining global money transfers, disrupting that sector by offering a 90% discount on traditional bank transfer fees.
How FinTech is changing your customer
FinTech is also changing customer expectations and behavior at a tremendous rate.
Customers are now so used to being able to access information and data anywhere and everywhere, that it looks natural to them to want to be able to adjust their investment deposit or portfolio a check while waiting for the bus.
And customers, however fairly or unfairly expect the same level of access and service from a small firm as a large firm. They assume a seamless mobile experience, whether they are banking with a local credit union or their global bank. And they assume to be able to pay with a credit card whether they are in the corner shop department store or a corner shop. Soon, people will expect to be worthy to pay with their phones everywhere they go as well.
It is a great democratization of services, but also a sign of warning to businesses that there is no justification these days for not embracing the latest technologies — and those who refuse will undoubtedly be losing business.
Conclusively, FinTech is just in its nascent stages. The business is changing rapidly, and savvy business owners will desire to stay informed as a vital part of their business plan. Businesses will be ready to offer more services at a lower cost than ever before, but only if they on the cutting edge of what is available and possible.
Those that do will stay at the front of their markets. Those that do not will lose out on opportunities, customers, and market share.