January 28, 2017
There is enough said about the scale of the FinTech industry, its inclusive agenda and massive surrounding ecosystem, but the real value of this industry is not in millions that are moving around in funding, expansion and acquisition deals. The value is measured in micro-processes, in the real, everyday difference FinTech startups make for small businesses and individuals.
One of the most important hallmarks of the FinTech community is its focus on solving cumbersome operational problems, allowing business leaders to recalibrate resource allocation (talent, financial resources) to deliver value to their clients rather than to simply remain afloat in a highly competitive market. Let’s look at three illustrative examples of FinTech companies that make a real difference:
Entrepreneurship is a rough terrain that often discourages one from the journey. Regardless, talented professionals around the world still choose to build a successful business from the ground up, to see it grow and blossom. Business banking, hence, is an important niche in the financial services industry – moving billions internationally and ensuring security and compliance. The caveat with the traditional sector, however, is that business banking is mostly limited to providing a bank account and a line of business credit rather than getting mixed in other aspects of business operations.
Meanwhile, for startups/small businesses and entrepreneurs, those operations are the backbone of the business and often present a challenge to smoothen up to focus on more important things – delivering a value. That’s where FinTech makes a difference – companies similar to Holvi are not limited to providing a bank account, they are building services that make entrepreneurs’ everyday life easier.
Holvi is the world’s first financial hub operating with its own Payment Institution License authorized for operations across Europe by the Financial Supervisory Authority of Finland (FIN-FSA). It’s everything a business needs – an account, paperless bookkeeping and easier invoicing. The company allows entrepreneurs to set up and run an online store in just a few clicks with no need for expensive software or coding skills. Its fully integrated with business account and bookkeeping. Sales are tracked and recorded automatically so business owners can focus on getting more, rather than copying the details of previous sales into accounting software.
While one set of companies takes care of everyday background operations, another set solves an issue even more complex – tax and compliance. Simple Tax, Satago, a whole set of RegTech companies are unleashing the innovative capacity of businesses with cost-efficient data management and reporting solutions.
RegTech deserves a special attention here – the whole segment forever shuttered the traditional approach to handling compliance and presented the market with over a hundred RegTech innovators, applying the power of modern technological advancements to compliance. Within itself, RegTech is a diverse community of bright entrepreneurs solving various regulation-related problems for businesses and financial services companies, in particular, KYC/CDD, AML, risk management, market surveillance, fraud detection, etc. In that regard, RegTech ‘shares a wall’ with FinTech startups that are offering solutions for same problems, but are not particularly compliance-oriented – cybersecurity companies, real-time fraud detection companies, a range of identity verification solutions, etc.
The whole class of FinTech companies that focuses on ‘software-izing’, if we can call it so, the lawyer and an accountant, tremendously eases the burden for small businesses and allows the leadership to focus on the value of the business rather than ensuring no laws are broken and taxes are paid.
The value and the difference in approach to business banking brought by FinTech is clear. What about individuals? P2P money transfer services landscape is vast and expanding at the speed of light. While incumbent P2P transfer services are mostly about getting the bank info right, FinTech alternatives are mainly just about knowing who you are sending money to.
Venmo, Google Wallet, Facebook Messenger, etc., made user experience the priority over the transaction itself. FinTech companies moved the movement of funds and bank account information to the background, focusing on the context, UI/UX and social aspect of sending money. Needless to say, they have hit a goldmine in the redefinition of money transfer services.
Following the steps of heavyweights in P2P payments, hundreds of mobile wallets offer seamless payments experiences with variations in scale, integration capabilities and more. The Tag Group, for one, is an example of a comprehensive approach to payments and commerce operating: Tag Cash (a payments solution in Philippines), Tag Cash NFC (stored-value closed loop currency), TagWild (gamification of loyalty), TagBond (store information or anything or anyone), Tag77 (event and ticket management) and TagLink (allows businesses to find new customers, manage and keep them).