3 Ways Fintech is Disrupting Traditional Banking (And Why That's Good for Your Business)

Fintech truly burst onto the financial services scene almost two decades ago. Since then, a wave of innovation has disrupted banking, lending, payments, and small business accounting.

But what does this mean for you, if you’re a business or finance leader who has mostly remained ‘fintech curious’ up until now? 

Where fintech is transforming business and finance

Let’s take a deeper dive into the areas of fintech innovation we mentioned above so you can get to know fintech better while identifying the opportunities to improve your business finances.

1. Small business finance

For decades, small businesses have had a tough time getting access to the credit they need. And it’s here — in SMB working capital — that many businesses have begun feeling the benefit of fintech disruption.  A Bank of International Settlements (BIS) analysis of two fintech small business lenders discovered the startups lent more in zip codes with higher unemployment and higher business bankruptcy filings. The BIS suggested fintech lenders are well-placed to help small businesses that were less likely to receive credit through traditional lenders to access credit at lower costs. 

Aion is one of a number of fintech companies that provides businesses with access to much-needed finance. For example, we provide non-dilutive capital, to unlock business revenue that is tied up in outstanding invoices and inventory. 

2. Business payments

Fintech companies have begun solving the problems with payments too. A recent BNY Mellon survey of leading finance executives shed some light on this area of disruption. The report highlighted why businesses choose fintech companies for their payments needs, instead of traditional financial institutions. Businesses go the fintech route so they can gain:

• greater payment options (47 percent) 
• better automated payment reconciliations (45 percent)
• and access to real-time payments (29 percent).

There are a number of other ways fintech companies can help your business improve its accounts payable and accounts receivable management too. For example, Aion customers can bring their business banking and payments into a single platform, without having to push or pull funds from external accounts.

3. Expense management 

Fintech innovation is also helping businesses to better manage the burdens of accounting and broader financial management.  A recent Mastercard report suggests 76 percent of American small business owners use their personal cards for business expenses. This approach can:

• complicate both your personal finance and business finances 
• make it more difficult to track your business spending 
• and create headaches when it comes to tax time. 

Expense management platforms are one potential solution. They can help businesses identify rising expenses and start cost reduction before outlays get out of hand. Many expense management platforms are also linked to corporate cards and virtual cards, which allow business owners to limit or block spending on certain categories of expenses. 

Sign up for free today for Aion’s all-in-one business finance platform.

What are the challenges in the fintech industry?

But fintech is not perfect. Adoption can pose some risks for businesses too. The sector has innovation baked into its reason for being, but the sheer volume of fintech startups in America today means some will have higher service levels and standards than others.  

A recent World Bank report explained some fintech companies may face greater risks of insolvency than established financial services because of “inexperience, untested businesses, and market factors affecting long-term viability.”

The pace of innovation has made it difficult for US regulators to apply the same level of checks and balances it does for traditional banks and financial institutions.  

Your business can mitigate these risks by asking fintech providers about their safeguards in areas such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. 

Reputable fintech companies will be able to give you a clear picture of how your business’s financial data is stored, managed, and protected. 

At Aion, we work closely with our banking partners and employees to keep customer data safe. And we are fully compliant with regulatory standards.

Where does fintech fit in your business’s future?

By and large, fintech provides a broad range of ways to transform key areas of your business’s financial operations. Ultimately, finding the right-fit solution will depend on your business’s particular financial situation, its industry, and your current market challenges.

But there are some broad questions you could ask to see if your business can benefit from a fintech solution. Answer the following:

• Is it taking us too long to move funds in and out of our business?
• Do we struggle to close our books in a timely way each month?
• Can we quickly see exactly what we are owed and owe others?
• Do we have real options, if we need to call on outside financing?

If you answered no to one or more of those questions, then it might be time to explore how fintech can help you solve these problems and improve your processes.