June 25, 2019

Fintech is the Answer to the Prayers of SMEs Worldwide—Here’s Why

Small and medium-sized enterprise (SMEs) should ignore Fintech at their own peril! Over the years, the Fintech industry has grown rapidly in every part of the world.

Did you know that the overall funding in Fintech has grown from US$11 billion eleven years ago to US $78.6 billion today?  And, the reasons to invest in Fintech do not end there.

Fintech is thriving globally. According to Ernst & Young—a leading multinational services company, today a third of worldwide consumers are using two or more Fintech services while more than 80% of them are aware of Fintech—an increase of over 20% from the previous year. Consumers are warming up to Fintech and so should SMEs.

Opportunities Galore for SMEs

Fintech is unlocking a plethora of opportunities for SMEs worldwide. For example, it has unlocked banking opportunities for the ‘unbanked’ in South East Asia. This is good news not just for the people without a bank account in the region, but also for the SMEs based there. According to KPMG—another global leader in financial services, people with a bank account in South East Asia are a mere 27% of the entire population. That’s over 400 million ‘unbanked’ people in the region.

Similarly, a 2010 Study by McKinsey—a global management consulting company, shows 2.5 billion unbanked people in Asia. The study suggests that by reaching those without a bank account in the ASEN region, businesses can help increase the region’s economic contribution from the $17 billion in 2010 to $52 billion in 2030.

It is no secret that the masses worldwide—particularly in the South East Asian region, are struggling to overcome poverty, making it nearly impossible for them to borrow or save money. This presents SMEs in the impoverished regions of the world with both an opportunity and a responsibility.

By investing in Fintech and providing innovative financial solutions, SMEs worldwide can help improve the livelihoods of the unbanked in their regions while growing their own ‘customer base’. Access to banking and other financial services is a basic right. As a small or medium-sized business, you would be favoring not just the ‘unbanked’ in the region, but also yourself by enabling it.  By leveraging fintech, you can deliver the right technology solutions to the unbanked to improve their standard of living while growing your business at the same time.

Reason to be Optimistic

SMEs in all parts of the world that are opting to invest in Fintech have a genuine reason to be optimistic. This is especially true for impoverished regions such as South East Asia. This is because mobile networks play a key role in enabling Fintech and the percentage of mobile connections in South East Asia is higher than the global average. There are other reasons as well that make investment in Fintech a great option for SMEs worldwide, particularly those based in regions with many ‘unbanked people’ such as South East Asia. Following are some of the main benefits for SMEs to invest in Fintech.

1.     Easier to Accept Global Payments

Before Fintech, the only way for SMEs to accept payments from abroad was through a major credit card company. Luckily, things are now less complicated and affordable all thanks to new innovations in the financial sector and overseas payment collection. An example of this is the payments collected through a global online payments system such as PayPal or Stripe that require only a small but secure card reader to be accepted. These card readers can be accessed through merchants as well as a smartphone. This means that customers can make payments to your business from virtually anywhere.

2.     Ability to Secure Loans without Collateral

In the past, banks and other financial institutions required businesses to keep something as a collateral to secure a loan from them. Typically, the collateral would be a property, holdings in gold, or other liquidatable asset. While the big companies had no problem presenting a collateral to the bank or financial institution, SMEs would typically balk at this requirement to secure a loan.

Fortunately, financial technology companies or FinTechs as they are popularly known have solve this problem for small and medium-sized businesses. They have solved the problem by offering loans to businesses without asking for any collateral from them.

3.     Easier Access to Financing

Unlike the traditional lending process that is both cumbersome and time-consuming, lending in fintech is faster and a lot less complicated. This is because of the human-centric approach of Fintech lenders. The entire lending process in the Fintech space is created to make things easier for the customer—which are mostly small and medium-sized businesses.

First and foremost, SMEs can secure loans at any time and from any device. Additionally, they only need to produce minimal documents to secure the loan and they can upload these documents at their convenience. Fintechs can determine a business’ creditworthiness in less time than a bank or other traditional lender as they use smart algorithms to review data from different sources. Typically, these sources include the owners’ background, business location, net earnings, cash flow etc.

Additionally, once an applicant is approved for loan, Fintech companies do not take much time is disbursing the approved amount to them. Lastly, SMEs can bring down the costs of these loans further by choosing the right product and signing up for flexible repayment plans.

4.     Ease of Overseas Business

Before the recent innovations in the financial sector that led to Fintech, SMEs had pay huge sums to banks and other intermediaries as a fee to do business and receive money from abroad. Put simply, SMEs that wanted to do business globally had no option but to pay a hefty fee to banks or other intermediaries supervising the transactions.

However, things changed with the introduction and evolution of financial technology (FinTech). Innovation in Fintech brought peer to peer (P2P) services. These services made it possible to make transactions between individuals or entities for a fraction of the fee charged by banks and other traditional intermediaries. Not only did P2P services make overseas transactions cheaper for SMEs, they also made them seamless.

If the above doesn’t make SMEs optimistic, then we don’t know what will. There’s a massive consumer population waiting to adopt financial solutions and you need to cash in on this opportunity by making the most of fintech and the innovative solutions for payments, ecommerce, lending, P2P transfers and so on. So, what are you waiting for?

by Bobby J Davidson

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