A portmanteau of financial technology, fintechs have addressed the wholly inadequate financial services that have been available for small and medium enterprises (SMEs). Currently, the United Kingdom is the fastest growing fintech region in the world, with it bringing £20bn to the economy each year.
The latest Scottish Pacific SME growth index shows that between 2014 and 2018, the proportion of SMEs using banks for funding dropped to just 24% from 38% with the amount turning to fintech instead rising to 22% from 11%.
Why Should SMEs use Fintechs?
Fintechs have the ability to revolutionise how SMEs operate, offering the opportunity to aid growth and development. Investing in fintechs such as data, software technologies and payments can prove advantageous for SMEs with a more competitive, efficient and cost-effective business model. Fintechs offer products tailored to the specfic needs of SMEs, such as peer-to-peer or marketplace lending, e-commerce finance, online trade finance and online supply chain finance.
Example of how Fintech can Benefit an SME
Fintechs can be particularly beneficial to SMEs in invoicing and payments, as SMEs can wait several weeks for the release of funds following invoicing. Fintechs can reduce this time to mere days, with fintech companies offering up-front payments available through easy to use online platforms. This can be particularly beneficial to SMEs, who rely on rapid payments to keep business operations flowing.
As internet shopping goes from strength to strength, people are not making purchases and paying with mobile devices or laptops, using banks that exist only online. Being able to receive online payments, cutting out onerous waits with high street banks is a massive benefit to SMEs. Things such as blockchain and cryptocurrency is likely to be taken advantage of by many fintech companies, due to its high level of security and revolutionary way to bank online.