Having the ability to continuously adjust to external factors has always been a part of a business owner’s DNA, but as the pandemic forced never-before-seen changes at a shockingly rapid pace, many businesses found that their go-to partners were unable to keep up with the complexity of these fluctuating needs. As a result, many business owners find themselves turning to financial technology (“FinTech”) companies to help get them through these unprecedented times.
Here are a few ways that FinTechs have evolved — especially since COVID-19 — to meet the needs of small businesses, as well as how you can use them to move forward into the new normal.
More Financing Options, Greater Financial Inclusion
Since the inception of the industry, online lenders (a core FinTech group) have played a role in enhancing financial inclusion by offering funding options to traditionally underserved and underbanked business owners. The pandemic has accelerated the role these organizations will play in business financing.
Businesses with fewer than 20 employees make up 98 percent of all small businesses (including sole proprietors). Yet, lending to SMBs is one of the first cuts that banks have historically made during recessions. We saw this during the 2008 financial crisis, and we’re seeing it again now. Why? Because they’re deemed too small for banks to take the risk.
As a result, the pandemic has once again left SMBs with few financial options and impossible application requirements for those options that do exist.
This is where online lenders step in.
Rooted in technology and data, FinTech financing companies bypass traditional requirements (e.g., high FICO scores and lengthy credit histories), instead considering hundreds of alternative factors to assess the business’s potential. These nontraditional financing organizations fill the gaps left by banks, lowering barriers and getting capital into the hands of more SMB owners.
How you can take advantage: There are more business funding options now than ever before. If you’re having a difficult time obtaining loans from your bank for your business, or you just need access to quick capital to help cover payroll or operating expenses, don’t be afraid to find a digital-first online financing provider, like Kapitus. It can save you hours of paperwork and waiting, as well as provide you diverse financing options from which to choose.
Meeting Your Customers Where They Are
Over the past year, there has been a significant decrease in the prevalence of cash payments as COVID-19 concerns have spurred accelerated adoption of contactless payments. A global consumer survey by Mastercard estimates that nearly 80 percent of consumers worldwide are using contactless card payments, and the behavioral shift is here to stay. Consider that 75 percent of those surveyed indicated they will continue to use contactless as a payment method post-pandemic.
FinTechs have evolved alongside changing consumer behaviors to help businesses digitize and meet their consumers where and how they shop. Payment processors, such as Square and PayPal, have pushed out new features such as QR code payments, while e-commerce platforms like Shopify offer online checkout products like Shop Pay to reduce any friction for consumers to purchase from online retailers.
How you can take advantage: FinTech organizations are providing you with the tools you need to easily create the experience that your customers are looking for. Do your due diligence and determine how your customers prefer to conduct transactions in a post-pandemic world, then implement the solutions that allow you to meet your customers where they are, making the transition to the “new normal” as seamless as possible for both you and your clients.
Using Open Banking to Drive Operational Change
Open banking, which provides a method of secure data exchange between your bank and financial service providers, is another area of FinTech that has caught the tailwinds of the pandemic, driving significant change in the way that SMBs can manage their day-to-day operations.
For example, FinTechs like Xero and Wave aggregate all your financial data (if you approve, of course) in one place, with intuitive user interfaces, to provide holistic financial management and insights on the financial health of your business. Using their services, a business owner can manage her accounting, payroll, invoicing, and expenses all from a single app. And going even a level further, insurance technology (insurtech) companies, often partnering with FinTechs, are increasingly offering more SMB-friendly business insurance policies because they leverage the data and insights offered with open banking to create sophisticated products where both sides win.
How you can take advantage: Do your research to make sure a financial service provider has comprehensive data security measures in place. If you feel comfortable with a company’s data usage policy, sharing business financial data could lead to personalized solutions and insights that cater to the specific needs of your business that otherwise may have been unavailable to you.
FinTechs have prioritized accumulating knowledge across millions of SMBs, allowing them to identify solutions that can truly accelerate growth and recovery for businesses. As the world moves further into a post-pandemic new normal, FinTechs will continue to innovate to meet the changing needs of business owners.