How FinTech could be the future of your business
‘FinTech’ or financial technology is a phrase increasingly used in the media, the finance sector and the business world in general. In the broadest sense, financial technology is any technology that is used and applied in the financial services sector which improves the delivery of financial services. But what does that mean and why should you care that it is one of the fastest growing areas for venture capitalists or that the sector generated almost £7billion revenue in 2016?
What is FinTech?
Whilst many people, when they think of FinTech, often focus on start-up companies which develop technologies and processes to disrupt traditional banking and other legacy financial institutions’ practices such as, money transfers, fundraising, loans and asset management; the scope of the FinTech world is much wider than this as it includes, in addition to large, well-established financial institutions, technology companies such as Facebook, Apple and Google, as well as companies such as MasterCard that provide infrastructure or technology that aides financial services transactions. The common theme is that FinTech provides a means for businesses to increase their financial efficiency, whilst also improving a client or customer’s experience. Both you and your business may already be using FinTech without realising it.
The financial services sector was disrupted in the early 1980’s with the creation of the ATM as customers were no longer restricted by only being able to withdraw money from their local bank branch or only being able to access their money during the bank’s opening hours. Suddenly, we had access to our money 24 hours a day, 7 days a week. More recently, further technological advances were made with the advent of mobile payments.
FinTech is not just for entrepreneurs. FinTech has and continues to revolutionize the commercial sector by making it easier to do business and at a significantly lower cost. By way of example, traditionally, if you wanted capital to start your own business or expand your current one, your first port of call would be looking to the banks or other financial institutions for loans. However, recently crowd sourcing has become a significant method of expansion for businesses as it allows businesses to acquire funding from anywhere in the world by simply making a pitch for it on the internet. This injection of cash can be instantaneous as opposed to the historical position that could have involved months of investor talks.
With the rise in the use of smartphones and the online culture that has developed, FinTech allows smaller businesses to compete with larger companies on a more equal footing and at a fraction of the cost. For example, a company called iZettle identified that 20 million small businesses across Europe do not accept credit or debit card payments due to the cost of processing card payments. Countless customers were lost as a result. iZettle solved the problem by turning a mobile phone into a point of sales system so that the small businesses could now afford to take credit and debit card payments.
Whilst FinTech originally offered products and services in mobile payments, money transfers and peer-to-peer lending, the area is constantly developing and expanding into other areas within the financial sector such as credit underwriting, digital cash and treasury functions. By keeping up to date with FinTech advances and the latest opportunities available, you could reduce your outlay whilst improving your business and ensure you remain competitive.