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You’ve split the cost of dinner with friends over Zelle or PayPal. You’ve used an app to plan out your personal and business budgets. This is all fintech—and it’s been transforming the way small businesses operate and access financing.
“With fintech, you can improve the way you work, provide better customer experiences, and drive growth. However, navigating the fintech landscape can be complicated, with many solutions and unique challenges,” said Credibly Founder and co-CEO Ryan Rosett.
Plus, the fintech space is worth over $226 billion—and only slated to grow in value for the convenience and security it provides for finances.
In this blog post, we’ll cover what fintech is, how it works, how fintech is changing the way small businesses operate, and how these tools are helping small businesses stay secure.
To start, what is fintech?
Fintech, short for “financial technology,” revolutionizes how we handle money. These companies leverage cutting-edge technology and cloud services, bypassing the need for physical locations.
Early instances of fintech include Square, which was founded in 2009. This empowered small businesses to accept credit cards via mobile devices.
Fintech solutions cover a wide array of financial services, including helping business owners manage payroll, enabling more efficient accounting, and opening access to borrow money, and more. For virtually any financial task, there’s likely a fintech solution available.
As a result, more consumers are relying on fintech for everything from personal financial matters to small business finance—saving time and reducing stress.
 Source: Statista |
The Impact of FinTech on Small Business Growth and Financing
As we discussed above, fintech revolutionizes the way we manage finances. Here’s a look at how they operate.
Aggregating financial data
Some fintech apps pull together financial account data from multiple sources, presenting it in a single, user-friendly interface. This allows business owners to view all of their financial information at a glance. These apps often provide personalized advice based on the aggregated data to help small businesses improve their financial health and stay on track with their goals.
Essential technologies
These are just a few of the technologies that make fintech so accessible and easy to use.
- APIs: Financial application programming interfaces (“APIs”) securely connect users’ bank accounts to fintech services. They support data sharing, fund transfers, and identity verification. For example, peer-to-peer payments through Venmo or Zelle are made possible through APIs.
- Mobile apps: Most fintech companies offer mobile apps, giving users instant access to their funds and financial insights. Whether it’s a digital banking app, like Credibly checking, or an investment tool, mobile access is a cornerstone of fintech.
- Web-based solutions: In addition to mobile apps, many fintech services offer web-based platforms, allowing users to perform the same functions via a web browser. Think of how you can access your Bank of America bank account on both your web browser as well as the mobile app!
Fintech and business financing
Fintech also enables service providers, like financing providers, to expand access to capital.
By leveraging large datasets and artificial intelligence, fintech companies can evaluate multiple data points to make lending decisions.
Whereas a business owner with a poor credit history may be declined for financing at a bank, fintech allows alternative lenders to factor in the business’s recent performance using bank statements and other data sources outside of just a credit score. If they’ve been generating strong revenue in the recent months, they could still qualify for financing.
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How fintech is improving quality of life for small businesses
With visibility into financial health and easier access to financing opportunities, small businesses can take care of more business in less time.
Easier access to financing
Fintech revolutionizes the lending process by utilizing authorized digital data for swift and accurate underwriting decisions. Plus, much of this process can be automated, meaning you could get approved in hours vs. waiting days or weeks through traditional banks or the government. (This also includes those with non-traditional credit histories.)
Fintech also provides access to financing with:
- Flexibility: Whether you’re a seasonal business needing a merchant cash advance or equipment financing, fintech provides the flexibility to borrow without stifling your cash flow.
- Faster approvals: With a fintech financing company, you can get approved and have an offer to review in as fast as 4 hours.
- Lower eligibility requirements: Your fintech financing company looks at your business’s financial history and overall performance, allowing them to have lower minimum eligibility criteria than traditional banks.
Unparallelled business insights
With real-time updates and smart data analytics, fintech provides business leaders with critical insights. These tools enable quick decision-making, allowing businesses to adapt marketing strategies, pivot operations, and capitalize on favorable market conditions.
Improved convenience for customers
Fintech enables businesses to provide customers with faster and more convenient ways to make transactions. Advancements like payment processors have redefined how customers engage with small businesses.
Streamlined accounting processes
Modern accounting software, integrated with cloud technology, allows businesses to manage their books from anywhere, anytime. Banking activity and information reduce the time spent on manual data entry and reconciliations, keeping financial records up-to-date and virtually error-free.
As your business grows, adding specialized apps extends the capabilities of your accounting systems. You’re empowered with faster and more accurate financial management while freeing up your time to focus on running your business.
You could qualify for up to $600,000 in financing.
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How fintech is keeping small businesses secure
Beyond improving loan accessibility and business workflows, fintech is offering additional layers of security for small businesses and the data they handle.
Fortified data protection
Fintech incorporates advanced security measures like encryption and data recovery protocols—this helps prevent unauthorized access and data breaches.
Improved authentication and fraud protection
These systems use technologies such as two-factor authentication and biometric methods to verify user identities, greatly reducing the risk of identity theft for your customers. Additionally, continuous monitoring and fraud detection algorithms help identify and mitigate suspicious activities before they cause harm.
Compliance with regulations
Adhering to local, state, and federal regulations is vital for maintaining trust and avoiding legal issues. Fintech solutions help businesses comply with payment regulations by employing advanced encryption techniques.
Mitigating cyber attacks
By establishing comprehensive data access policies and using encryption security, fintech tools create a secure environment for financial transactions. Regular updates and security patches further protect systems from emerging threats.
Creating data backups
Data loss can be devastating for any business. Fintech solutions provide essential data backup services, ensuring that all critical information is regularly saved and can be quickly recovered if needed.
