Fintech: Three Killer Ways to Use Technology To Make Finance Simpler, Easier, Faster And Safer
Across the major financial capitals of the world, fintech startups are booming. What initially started as essentially database solutions to store and protect data has now become the biggest driving force in finance. Whether it is the big banks or e-commerce firms utilising these new innovations, or the finance and accounting department at any major corporate, the race is now on to use technology to make finance simpler, easier, faster and safer.
Right now the major focus of fintech is in the retail industry. A lot of players have entered the market and are competing with banks to provide payment solutions, purchasing solutions, easier methods of funds transfers and cheaper and faster borrowing. However, the next big jump for fintech will be to move on to the corporate side in a big way.
Fintech for Corporates
The finance and accounting departments at corporates face a mammoth task in ensuring the seamless flow of capital across the organisation and beyond into their supply chains. Increased efficiency in this area does not only mean an increase in financial efficiency but can also lead to direct savings which affect the bottom-line. Recently, we are beginning to see a number of fintech players move from the retail industry and target medium to large corporates with their services.
Supply Chain Financing Industry
As an example, we can look at the global Supply Chain Financing industry. The traditional process involves a huge amount of manual work regarding invoicing, tracking payments, follow up with channel partners, managing the working capital gap etc. Even with the digitisation of the paperwork, most of the process remains the same. However, many fintech companies are now stepping in to totally auto-manage the entire process.
How does it work?
Fintech companies are providing platforms whereby corporates do not have to do any due-diligence on their channel partners. They simply buy a subscription from a service provider and can filter various vendors based on their specific requirements. Where this gets better is that the service provider will automatically collect all KYC (Know Your Customer) documentation and other certificates on behalf of its clients. Furthermore, all payments will be automatically tracked and users merely need to authorise the payments on the portal. Similar systems may be adopted on the receivables side with systems tracking all incoming payments and automatically reconciling them with unpaid invoices. Any shortfall in working capital may trigger an automatic request being sent to banks or financial institutions to fund the shortfall.
While many systems already exist which can do a similar task as described above, fintech is bringing a new level of efficiency into the system and a seamless integration with existing processes/ platforms. When the first fintech solution providers entered the retail industry, many experts wondered if there was indeed any value addition being done by them since the services they were providing were already being offered by banks and other financial institutions. However, by using technology to speed up service delivery, improving the way information is presented, and streamlining the process of performing transactions, fintech has managed to carve out a big niche for itself. Now, the same strategy is being applied to corporate finance as tech-efficient solutions are penetrating old and cumbersome legacy systems at companies around the world.
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Our Renaix Guide to Big Data, Analytics and Fintech provides information on trends in the industry.
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