You’ve probably heard of fintech by now.
Maybe your company has adopted some fintech services or maybe you use a fintech company for personal use.
Or, if you’re like most – although more tech-savvy companies are adopting fintech services every day – you’ve read or heard about it somewhere but you’re not quite sure how fintech works, what it is, or if it deserves your attention.
How Fintech Works And How It Is Different To Traditional Finance
Fintech is a compound term for finance and technology. A fintech company provides a financial service that has traditionally been monopolised by the banking sector and builds it upon technology.
That technology is nearly always heavily invested in both in capital and manpower with the intention of innovating, or to use last year’s buzzword, of “disrupting” the traditional finance sector – the big banks and financial organisations of the world.
Fintech companies aim for improved speed of service and transactions; an easier, more enjoyable user experience; and pricing that cuts down on your costs. All versus the traditional finance sector.
A fintech is both a tech and a finance company simultaneously. They usually contain a team of engineers and developers on one side and market experts, financial analysts and the like on the other.
As traditional finance has always been monopolised by a small band of banks, it has always been in their interests to keep financial service processes intricate and difficult to understand, with a lack of transparency and high pricing.
If there is little to no competition and your company has no alternative but to pay such prices for services, what could you have done before?
There was no other option so you paid and your company likely felt that it was the only way.
It was the only way.
Now this is not the case. Fintech has created competition – real competition, not the pseudo variety between different banks all offering the same thing at the same price.
And as record venture capital flows into fintech ($12 billion globally in 2014 alone, a quadrupling of the $3 billion invested in 2013), a brain drain from both the traditional finance and tech sectors is building as some of the brightest talent choose to work in fintech instead.
Why Should I Care About Fintech?
Now your company has choice when it comes to financial services, which can make a big difference across your company.
No longer is it a choice between Bank A and Bank B, where there is little to no differentiation between the product or service that they offer.
It is a choice between what banks offer and what fintech companies offer. Say your company needs a loan and your bank grants you a line of credit. But you later find out that if you went with a P2P fintech business loans company, you would have received much better terms.
Now throw in other financial services your company might need – money transfer, foreign exchange, equity funding – and you may well be looking at a massive difference in costs, quality of service and time across the board.
At the very least what this increase in competition in finance now demands is a benchmarking practice to protect your company’s best interests.
Another curveball – say your main competitor benchmarks on all their financial needs, and they optimise their costs and efficiency, this gives them a competitive advantage over your company. And if they don’t, you are missing out on a clear opportunity to gain a competitive advantage.
7 Fintech Companies To Consider For Your Business
Some of the main financial services that fintech caters to include company loans, international payments, foreign exchange, SME financing, and asset purchases and trading. Here are 7 companies whose services may interest your company.
Through the Funding Circle marketplace that connects lenders to established businesses, over £1 billion has been issued to over 12,000 businesses. Funding Circle is one of the leading alternative business lenders.
Market invoice is one of the more prominent fintech companies. Through their service your company can raise money quickly by selling your outstanding invoices online. They have funded over £600 million in outstanding invoices to date.
GoCardless serves over 13,000 businesses in the collection of payments via automated direct debit.
4. The Assets
This Paris-based company allows you to buy, sell, swap or rent tangible and intangible assets on a marketplace with other companies worldwide. It gives you a platform to move on underused or undervalued assets and vice-versa if you wish to acquire something.
More for smaller businesses, this company helps to cover short term cash flow problems by advancing payment on your company’s outstanding invoices for a fee.
Taulia offers a service focused on improving your financial supply chain. For instance, suppliers can choose to receive early payment in exchange for a discount on their price.
7. Sage Pay
This is a UK-based company that offers safe and reliable payment services, including online, over the phone, in person and invoicing. They currently have over 55,000 clients.
The Final Word
Fintech offers a wealth of options for your business.
It creates greater competition in financial services, which is of course only good for your company.
To really take advantage of fintech and to ensure your company reaps the benefits it can bring, we advise proper due diligence and a regular benchmarking process of all the financial services you need. Take the time out to compare your bank with a fintech (and also compare one fintech company with another if offering the same service), be it on credit options or payments services, or anything else.
If your company takes a holistic approach it isn’t a question of if your company will benefit, but rather by how much.
It will improve your efficiency, cut your costs and make doing business that much easier.
Eiger FX is a fintech company.
We work in and promote the fintech sector because it is changing how both individuals and businesses conduct their financial affairs for the better. We know the competitive advantage that fintech can bring to our clients and what it allows us to introduce to the international payments market.
We do not have any affiliation with the above mentioned companies whatsoever.
Further posts to read:
Photo 1 by Sam Beebe
Adoption Curve by Jurgen Appelo
Fintech Investment by CB Insights and Accenture
“An ´Uber moment´ for banks” by Bloomberg