Filling a void
Small and medium-sized enterprises (SMEs) are the driving force of most economies globally, yet can sometimes struggle to access traditional financing solutions. Fintechs are playing a crucial role in filling this funding gap, helping both long-term financing requirements as well as working capital.
Fintech organisations are using tools enabled by artificial intelligence and big data to gauge credit-worthiness, creating a reliable credit history for previously unfinanced SMEs. This, coupled with low overheads, allows fintechs to lend to micro, small and medium enterprises more quickly and at lower costs.
This is instrumental in supporting these companies’ growth ambitions. In Southeast Asia, for example, thousands of small companies’ growth is inhibited due to capital constraints. Ride-hailing apps Go-Jek and Grab are swiftly moving into the fintech space to fill the funding void for smaller firms.
Separately, payment processing fintech companies “can show businesses consumer patterns and provide data about interests, wants and needs,” says Mr Prentice. Small businesses can use this data to improve their marketing for leads and current customers, putting them closer to on the same footing as their larger competitors.
Besides financing solutions, fintechs enable a streamlining of processes, which benefits small and large companies alike. According to Mr Wegner, large companies are likely to face structural challenges which can impact their ability to expand.
“A conglomerate may find itself with many fragmented processes that operate in silo due to the size [of the firm], which in turn affects efficiency and connectivity across the wider business,” he says.
Blockchain can help overcome this by serving as what he calls a “single source of truth”, or a singular model, that can be adopted and replicated across all parts of business. For large companies, achieving this kind of universality across various moving parts of a business can be the key to unlocking scale, Mr Wegner says.
What the future holds
Fintech is helping companies overcome funding and size constraints by providing them with tools and solutions that are enabling them to do things faster, better and in a more cost-effective manner.
The financial services sector is naturally ahead of the curve at this point given the direct benefits fintech brings it, but fintech solutions are increasingly useful across other sectors, too. Traditional companies that earlier resisted technology adoption, are also partnering with fintechs to address pain points in their business. And some are even funding them as they look to mitigate constraints.