Fintech is still a new word, in fact, a lot of people don’t know what it means or what to apply it to. It only appeared in the online dictionary in 2018. It’s a portmanteau of ‘finance’ and ‘technology’, and like the source words would suggest, it has become the word used to describe the plethora of alternative finance and technology providers that fill the gap left by traditional financial services companies.
It covers everything from cashless payments to crowdfunding platforms, to robo advisers, to virtual currencies and more. But what this means for you as a business owner is a rapidly developing industry that gives you options.
Recent studies have shown that SMEs are less inclined to use banks and are now turning to non-bank funding solutions. This also aligns with what we are seeing first hand at Timelio where SMEs are truly frustrated with their traditional financiers and seeking out fintechs, like Timelio, to fill the funding hole.
More and more SMEs are turning to Australia’s growing fintech market for their funding needs, and after the findings from The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, who could blame them. Here’s the most frequently cited reasons SMEs are embracing fintech:
there's a lot more flexibility
Fintech’s are more flexible than traditional lenders. This is usually because banks and traditional lenders have difficulty in responding quickly to individual customers, usually due to inflexible legacy systems, slow decision processes and risk-averse appetites. Fintech’s on the other hand are agile and able to respond quickly, and their heavy use of technology and proprietary systems means they can quickly adapt to individual customer needs and new market opportunities.
it's much, much faster
Fintech’s don’t have the same level of bureaucracy as banks and traditional lenders. Fintech’s, as the name implies, have a heavy reliance on technology to augment their financial services. Often using an API (Application Program Interface) based system, enabling collaboration with larger technology providers and data providers to enable them to scale quickly and provide a superior level of customer service. This means a greater level of automation and the end result is a much more expedient process from start to finish for the end customer.
high levels of transparency
Fintech's, unlike larger banking institutions, don’t automatically have your trust. They have to earn it. This means they need to make customers fully aware of any costs involved, so there are no hidden surprises, and they often operate under a pay-as-you-go model, meaning no lock in contracts or charges for anything you don’t use. Because of this, it also means that typically fintech's will work a lot harder for your business, often going the extra mile to earn and retain you as a customer – you’re a lot more valuable to a fintech than you are to a bank.
The oldest bank in the world that’s still open today started in 1472. Banks have been around a long time. Fintech's have not. In order to be competitive, they need to innovate. Fintech's take advantage of cutting-edge technology, continuously innovating to provide speed, simplicity and a better customer experience. Their size and relative new-ness means they aren’t bogged down by legacy systems, they can actively innovate from customer to customer, providing tailored solutions and better quality products.
Australia’s fintech space is growing extremely rapidly. In 2018, the Asia Pacific region led the global investment in fintech, an Accenture report putting the number at $55.3 billion. That’s more than double the previous year, and a significant portion will go to investing in research and development, working out how to make the customer experience that much faster, more flexible and easier-to-use.
Fintechs are often founded by financial professionals, people who have worked in the finance space for years, and who have seen how customers are mistreated and undervalued, treated as nothing more than numbers on a screen. They have made the decision that they can do it better, that they can innovate, create and provide a better solution than what’s available, and that their focus will be on what’s best for their customers, not just what’s best for their bottom lines.
The question isn’t why would you consider adopting a fintech solution? Why would you not.