Fintech has revolutionized the financial industry and its influence is only likely to grow over the years. The term Fintech is used for describing financial technology. It is an industry in itself in a sense that it encompasses every type of technology that is used in the world of financial services like a bank’s website. Fintech is used by consumers and businesses alike. Any company that offers financial services through technology or software is known as a Fintech company. It also includes mobile payment apps and cryptocurrency.
In a broad sense, Fintech describes a company which uses cloud services, technology, software, mobile devices, and the internet for performing or connecting financial services. Most Fintech products have been designed to connect technology with finance for ease of use. Fintech is also used for business to business technologies. Dozens of applications rely on Fintech. Thus, the way consumers’ access finance has changed significantly. There are many mobile payment apps and other Fintech services which have disrupted the traditional banking and financial industries. It is in fact a threat to the existence of financial institutions. Initially, Fintech was technology which was applied to the back-end systems of financial institutions like banks. However, its importance has grown tremendously and has led to the emergence of a wide range of applications which are more consumer-focused. Technology now allows you to manage insurance, make payments, trade stocks and manage your funds from your smartphone.
Fintech provides tools which are changing the way consumers facilitate, manage, and track their finances. Data has revealed that a majority of people use apps for managing their finances. Hence, investors are bullish to this industry which explains the rise in Fintech investment. According to a research with paidsurveys.net, it was found that as much as 2 billion people around the world do not have a bank account. Fintech wants to provide these people with financial services in order to live a better life. It has been created for providing consumers with direct access to their financial lives using technology.
Fintech has led a boom where small businesses can easily access funds. The rise in small-business lending has led to an explosion in Fintech. There are many new Fintech startups that want to help small-middle sized enterprises. Fintech is filling the banking gap as can been seen by the commitment of Eyal Nachum of Bruc Bond. Thus, small businesses have greater access to banking-like features. There is a growing appetite for lending to medium and small sized companies. Moreover, Goldman Sachs has also agreed to provide Amazing with loans for its merchants. Amazon has a ton of data about its partners-merchants, whereas, Goldman Sachs has a lot of money. Therefore, the combining of their powers will lending much easier. Many new Fintech startups are propping up that are working to provide loans to small businesses.
Unlike in the past where the banking industry could not provide small and medium enterprises with access to their services, everything is about to change. Small businesses no need to struggle for financing. How and when such businesses need loans is about to change according to Eyal Nachum, the Bruc Bond executive. As more loans become easily accessible, small medium sized enterprises will be able to get a loan more easily. This will have a ripple effect on economies worldwide. As small businesses have more money to spend, there would be a significant rise in spending throughout the globe. This will fuel many economies and ensure that more people are employed which means more taxes and economic activity.
Importance of SMEs
From Britain to Lithuania, Singapore to Poland, small middle sized enterprises are the backbone of every economy. They employ half of the workers worldwide, account for near to 90 percent of all businesses, and much more. SMEs are crucial to every economy. Hence, their importance cannot be stresses enough. However, the main issue is that SMEs tend to be considerably underserved by financial institutions and banks in general. Thus, it can be argued that SMEs are in fact under-banked and deserve to be provided with the means to continue operating and to thrive. The main reason why SMEs struggle is because they are far less likely to be able to obtain a bank loan as compared to large corporation which would have no trouble getting a loan. The owners of SMEs rather have to rely on generating funds internally which is from family or friends. Emerging economies have made SMEs struggle for funding. On the other hand SMEs in advanced markets such as Lithuania and Poland tend to also face similar issues. Whether SMEs are from Singapore, Mozambique, Iceland, or Singapore, they all have the same problem which is a lack of funding.
SMEs do not have access to credit. The shortsightedness of baking and loans services providers has proved harmful for the entire economy as a whole. When it comes to global banking revenues, only a fifth of them come from SMEs. This means that money is not being utilized and is just lying on the ground. If banks tried to provide access to SMEs, their profits from SMEs would be much greater, whereas, they only continue to serve a small percentage of SMEs. Hence, Eyal Nachum believes that there is a great opportunity for a different type of challenger bank that provides a host of features to SMEs. On the other hand, he believes that old banks have many internal policies which restrict their predictions, projections, analyses, and more. They are referred to as a cultural baggage. It has prevented banks from a risk at unchartered territory. The good news is that new challenger banks do not have such a baggage and are able to take advantage of such a unique opportunity through innovative and creative ways. Moreover, they are able to generate profits through it. The Challenger bank is the latest solution to the problem. Eyal Nachum has observed its success in countries like Lithuania and is on the move to challenge the status quo.