Fintech is enabling businesses to manage their finances more accurately, strategically and with greater flexibility. Learn how your business can use fintech to keep up.
Some of the most profound changes in business take decades to stick, while others appear to happen overnight.
Consider the ease with which you can now pay bills, shop and keep tabs on your finances. All those tasks and many other aspects of financial services and banking have profoundly changed in the past decade amid a wave of technology-driven innovation.
These days you can complete just about any financial transaction online or by using an app on a mobile device. All of your personal financial or business accounts are accessible anywhere, immediately. And you can share financial information securely and effortlessly.
Beyond convenience, this marriage of financial services and technology has become a productivity multiplier for small and mid-size businesses.
Accounting and cash flow management platforms like FINSYNC help save businesses time and money. All while making it possible for small businesses to benefit from the sophisticated data analytics and back-office efficiencies. That were previously only accessible to bigger companies with dedicated accounting departments.
If that laundry list of benefits seems too good to be true, you’re probably still cutting checks by hand, tracking your employees’ work hours with a punch card and wrestling with do-it-yourself bookkeeping software.
With 2020 nearly here, it’s time to consider the ways technology is changing — and improving — how businesses manage their finances.
Out with the Old
Fintech companies found fertile ground in the aftermath of the 2008 U.S. financial crisis and the rapid growth of cloud computing. Also as Americans’ growing ease with making financial transactions using mobile applications.
The mortgage meltdown and ensuing financial unraveling on Wall Street made traditional banks tighten underwriting criteria. It eventually led to the rise of alternative lenders. These online companies offer easier loan applications, faster processing, and higher approval rates by relying on a wider breadth of data to calculate risk than traditional banks.
As a result, online lending companies and other firms that apply technology to their financial services have gradually cut into areas that once belonged nearly exclusively to banks.
Everything from money transfers, payments, investing and lending are now possible online, typically through smartphones, eliminating the need for consumers to visit bank branches, meet with loan officers or even walk up to an ATM.
A Federal Reserve report issued last year found that online lenders processed mortgage applications about 20% faster than other lenders. It also concluded that the faster processing does not result in higher loan defaults.
Alternative lenders are also a growing source of financing for small and mid-size businesses. Last year, they handled roughly 32% of all business loan applications, up from 24% in 2017, according to the Federal Reserve.
A Complementary Fit
Increasingly, traditional banks are taking a page from their innovative rivals and becoming more online-friendly. In some cases, rather than tackling the expense of building their own software, banks are opting to team up with alternative lenders or firms like FINSYNC, which serve as conduits between banks and online lenders.
This is helping banks clear some of the obstacles that they’ve faced when extending small business loans. Including documentation, compliance, cost, and underwriting.
Several big financial institutions have partnered with Fintech companies in recent years. Goldman Sachs has funded loans by Prosper and also serves up personal loans through its Marcus online bank unit. Until recently, JPMorgan was teamed up with small business lender OnDeck. Meanwhile, credit card issuer American Express has partnered with GreenSky, a servicer of home improvement loans.
Partnerships between traditional financial institutions and technology companies are likely to become more commonplace. Especially as consumers grow more at ease with using online tools to handle their finances.
By partnering with alternative lenders through networks such as FINSYNC, traditional banks can solve more business problems and provide greater value to their business customers. The FINSYNC Network matches applications from small businesses with the lender that has the best options for them.
An Evolving Arena
FINSYNC Pay is another example of how financial service firms are introducing innovations that are leading to meaningful changes for businesses. The service allows clients to use their credit cards to pay for goods or services even when the vendor doesn’t have a merchant account to process credit card payments.
The payment is made via email, without the need for credit card account numbers or other sensitive information changing hands. This is a potential lifesaver for small businesses that need to tap their available credit to pay for cash-only expenses, like rent.
The technology-driven changes that are transforming the financial services sector show no signs of slowing. That’s good news for businesses that are open to adopting innovative technology. An all-in-one financial management solution like FINSYNC can enhance both profitability and efficiency.