Fintech Adoption in SMEs: What’s Happening?

The past couple of years have seen an explosion of fintech adoption across the board, for consumers, businesses, and government. This post looks at some of the fintech breakthroughs and the primary use cases of fintech within Small and Medium Enterprises (SMEs).

What is fintech?

Fintech is blend of ‘finance’ and ‘technology’, disrupting many areas of financing including banking, payments / remittance, consumer finance and energy. Not to mention, fintech has sparked new fields and areas including medtech (medical technology), edtech (education technology) and adtech (advertising technology). Fintech is a thriving industry, which received $17.4 billion in investment last year alone (2016), with fintech being most commonly used for money transfers and payments according to EY’s Fintech Adoption Index. It’s been adopted globally, with China, India, UK and Brazil at the forefront of fintech adoption:

Figure 1: Fintech Adoption in the Top 20 Markets, According to Ernst and Young. Source: EY Fintech Report 2017

So what are SMEs doing when it comes to fintech?

Fintech adoption looks set to gain momentum over the coming months and years, so let’s take a look at why there’s a growing need for digital banking in business. We’ve looked into numerous ways SMEs are utilising financial technology to scale up, cut costs, drive efficiencies or be market leaders in their sectors, and have summarised them below.

Payments and Banking

With technology moving at a rapid rate, companies not using online (internet) banking or digital technologies to take payment, are likely to be in a different mindset to the customer. In many cities, Tap and Go, or Contactless are the primary mechanism for payment for consumer facing businesses, More and more organizations expect instant transfers for payments, therefore it’s important to have these features enables and ensure all funds have been received or sent properly. Internet banking allows companies to keep a close eye on accounts and will ensure they can also meet the needs of clients by handling invoices promptly and efficiently.

Up front cost to implement (1/10)
Medium term saving to the business (4/10)
Customer need (8/10)

Management of goods and stock

Many companies now use software for inventory management or ordering stock. In particular, restaurants are integrating with point of sale and payment systems to auto-order stock when good quantities reach minimum thresholds, thereby saving the need to manually approach the suppliers.

Up front cost to implement (5/10)
Medium term saving to the business (6/10)
Customer need (1/10)

 

Improving security

When it comes to digital banking, cybersecurity is of paramount importance. It’s been at the front of mind and a highlight of 2017. Thankfully, banks offer a host of secure money management services to ensure company information and finances are well-protected.

As well as this, it’s important to use recommended anti-virus software, appropriate software and protected hardware in firms. When designing a company online banking system, be sure to follow the strict security protocols available such as using a hard-to-crack password for all accounts. Ideally passwords should contain numbers, letters and symbols and should be changed on a regular basis.

Here’s Silicon Valley Bank’s infographic on what resources tech companies expend to combat cybersecurity within their firms:

Survey: Cyber Security Impact on Innovation, conducted by Silicon Valley Bank in 2013. (PRNewsFoto/Silicon Valley Bank)

What’s more, as digital banking is usually completely customizable, companies do not have to share confidential information with all employees. Instead, enable employee access to accounts on a need-to-know basis and have measures in place to ensure all financial transactions are monitored.
Up front cost to implement (7/10)
Medium term saving to the business (6/10)
Customer need (10/10)

Going green and saving money

Companies wanting to lower their carbon footprint and do their bit for the environment can certainly look into paperless / digital banking. Not only will this increase the accuracy of items like invoices and statements, but also do good for being green, Consumers are paying more and more attention to corporate responsibility, so going green could provide a platform for some great PR enabling the company to target an environmentally-aware customers.

As well as being good for the environment, online banking can save money on printing costs. Companies may also be able to cut down on labor costs by using online banking to make deposits and track slow-paying clients.

Up front cost to implement (8/10)
Medium term saving to the business (3/10)
Customer need (7/10)

To conclude, using the power of the internet to drive efficiency and cost savings is always desirable. Digital banking is a good example of how fintech works well.

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Fintech Adoption in SMEs: What's Happening?
Article Name
Fintech Adoption in SMEs: What's Happening?
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The past couple of years have seen an explosion of fintech adoption across the board, for consumers, businesses, and government. This post looks at some of the fintech breakthroughs and the primary use cases of fintech within Small and Medium Enterprises (SMEs).
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Trade Finance Global