What the fintech revolution means for financial inclusion

From Artificial Intelligence (AI) to blockchain, emerging technology is quickly changing both how we think about finance and how we access it. Fintech is rapidly innovating, and with a growing number of predictions about what it will mean for the future of business, company owners and entrepreneurs are taking note.

The funding problem

While 2017 saw a surge in the emergence of new fintech startups, 2018 has brought about a maturing in the market as these products roll out and become more widely adopted across industries. They have become particularly impactful for small-to-medium sized businesses and startups, where technology is helping them get a leg up.

A number of studies have shown that the top challenge facing small and medium-sized enterprises (SMEs) is lack of access to finance. In fact, according to the World Bank, more than 50% of formal SMEs in emerging markets struggle with access to capital, a number that grows to about 70% if micro and informal SMEs are added.

However, disruptive financial technology has acknowledged this limitation and is helping SMEs gain access to funding in a host of new ways. The biggest opportunity that fintech provides is its potential for financial inclusion. New technology is bringing about new ways of unlocking liquidity in the financial system, allowing for more growth in emerging markets than previously thought possible.

Online business loans

One example of this is the emergence of online lenders, who are effectively disrupting the small business lending market.

Lenders such as OnDeck use machine learning technologies and algorithms to assess creditworthiness and provide businesses with alternative loan options to slow-moving traditional banks. Most of these are online peer-to-peer or peer-to-business lending platforms that are cost-efficient, transparent, and, perhaps most importantly, fast.

Through these, SMEs can get unsecured loans at reasonable rates and terms. They simply apply online and a decision is made in a matter of hours, with the money landing in the borrower’s account in just a few days.

This new type of lending could make all the difference for small businesses trying not just to survive but to scale up. An unsecured business loan at the right time can help SMEs to take care of routine business costs, and can also be pivotal when a business is looking to expand.

Invoice financing

Online lenders are also offering solutions to cash flow issues brought on by traditional invoicing processes. When businesses invoice their customers, there is usually a long wait before they actually receive payment. This can be damaging for SMEs, who need funds to keep business operations ticking along.

Companies like Touch Financial help by offering an invoice finance brokerage service, which allows businesses to get a cash advance based on the value tied up in their unpaid invoices. Some lenders use sophisticated online platforms, which are easy to access and often allow the business to receive the lender’s payment with greater efficiency.

The emergence of a new generation of financial technology has had a substantial impact not only on SMEs but on the way we do business in general. Fintech is driving economic growth by creating a space for financial inclusion and at the same time bolstering the rise of emerging markets.

Whether you’re hoping to start your own fintech venture or want to take advantage of its potential in your startup, educating yourself on new technology and its implications is crucial.

Head tutor of the new Fintech: Disruption In Finance online short course and eBranch and digital solutions manager at Nimble, Swati Safeda says, “To manage in this brave new world, financial services professionals need fresh insight, knowledge, and practical skills”.

Fintech courses such as the one offered by UCT in collaboration with GetSmarter, a brand of 2U, Inc., equip business owners and entrepreneurs with the foundational knowledge needed to participate in these dialogues and to explore the opportunities — and challenges — arising from this disruptive industry.

Learn more about UCT’s Fintech: Disruption in finance course here.


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