Does your business use money? Of course it does. That means the Fintech revolution is going to affect your business!
The Fintech revolution is underway around the world. Innovative Financial Technology companies want to do to commercial banks, insurance companies, Wall Street, credit cards and accounting firms what Amazon has done to retailers. Disrupt them.
According to Innovate Finance, $17.4 billion was invested in Fintech companies globally in 2016 alone. In fact, China led the US in total investment due to one $4.3 billion megadeal, an Alibaba subsidiary Ant Financial. That’s a lot of venture capital!
All of that investment is fueling innovation as well as rapid scaling of companies.
Which means soon Fintech companies will be pitching you to use their products and services, if they haven’t already. And they will be threatening the very existence of some of the financial products and services you are using today.
There are lots of sources for Fintech information and analysis for investors and for threatened competitors such as banks. We haven’t yet found anyone looking at the rapidly changing industry from the perspective of young and small businesses.
So we’re going to take on that challenge.
The 15 Fintech Reasons
To start with, here are 15 reasons why we think you need to know about Fintech and its impact on your business.
- Your accounting software will becomes a key data source for generating attractive debt financing, so you may need to think beyond QuickBooks and look at Xero, Freshbooks, Wave, Zoho Books and more.
- Online options for bookkeeping and accounting services may provide lower cost and higher quality than what your local market provides.
- Rewards based crowdfunding from Kickstarter, Indiegogo and others has already emerged as the dominant financing mechanism in creative niches such as independent films and game creation. That impact will only grow over time, perhaps to your industry and your competitors.
- Marketplace lending, the new name for debt crowdfunding (fka peer to peer lending), exploded in 2016 as asset based lending for small businesses grew 240% to $6 billion. You need to know if marketplace lending is a viable option for financing your business.
- Fintech debt companies provide a much faster yes or no than conventional banks. If your business has rapid and unpredictable credit needs because of unpredictable short term opportunities, you need to learn about those funding options.
- Even SBA guaranteed loans are faster with Fintech, which is why the #2 small SBA lender in 2016 was a Fintech company.
- While marketplace lending for businesses is rapidly growing, the field includes digital loan sharks charging extremely high fees. You need to know who are the Fintech lenders you can trust, as well as when a high fee still makes smart business sense.
- Fintech business lending uses data well beyond what’s used for your business credit score, so you will need to be thoughtful about your businesses’ (and your personal) digital footprint and its impact on your ability to secure financing.
- As algorithms measuring your credit worthiness improve they will also affect your ability to receive trade credit from suppliers, and may someday help you better judge if you should be giving credit to particular customers.
- The battle for payments – especially how consumers electronically pay for products and services from small businesses – is particularly intense now. You need to know what options are best for you, but also be aware of platform risks as not everyone will survive.
- While Fintech banks are not yet creating massive conventional bank branch closures the way Amazon is affecting retail branches today, they will. You need to be prepared by staying abreast of online banking options.
- There are even Fintech companies trying to make sales taxes easier, which could both save you time and reduce your risk of making an expensive mistake.
- The current frenzy around cryptocurrencies such as Bitcoin and Ethereum could lead to important customers asking you to accept them as payment. Should you?
- Continued advances in comparison shopping services with the addition of artificial intelligence will change the way consumers shop online for your products.
- If you do much international business Fintech is massively changing the way many countries make payments, transfer money, hedge currency risks, and in general conduct business. You will need to keep up, and even take advantage of the new business opportunities that arise as more developing countries leapfrog legacy financial services and power their economies with Fintech.
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