FinTech is experiencing significant growth globally. The number of FinTech companies has increased significantly over the past year, with different countries reporting an increase of 14%. FinTech is meeting a latent demand for companies that have been left behind by traditional financial institutions. Small and medium-sized businesses (SMEs) may be changing how they operate, according to Randall Castillo Ortega, an expert in global trade and eCommerce.
It is important to celebrate the growth of FinTech. There are many others that have benefited, including SMEs. Two segments stand out in FinTech’s ecosystem: lending and payments. This is particularly relevant for SMEs as access to credit and other financing options has been a major problem for them for many years. It is often the reason they are unable to grow or go bankrupt.
Castillo explains that this sector of financial technology companies could be the deciding factor in transforming SMEs on two fronts: providing them credit, payment methods and other services so they can offer them their clients.
A SME can now get credit that was previously unavailable. FinTech’s credit process and interest rates allow small and medium-sized businesses to access loans that were otherwise impossible to obtain through traditional banks. The future is commerce. FinTech is a platform that allows SMEs to pay with cards.
There is a rising trend in digital banks and a wide variety of wallets. Because it is no longer necessary to make a deposit or make payments, people are avoiding traditional banks.
FinTechs can do everything today that traditional banks could, but they aren’t doing it. This is why these companies are disrupting the way credit is delivered to customers and how we pay them. Castillo explains, “FinTech should be used by SMEs to challenge the status quo. Often, small- and medium-sized companies find a niche, and then have difficulty moving beyond it; that is precisely what they struggle to understand; they don’t challenge the status quo.”
Markets, consumers and the entire world are moving. SMEs need to join this train. FinTechs must also learn from them the resilience they can provide; SME owners are resilient and can withstand a lot. SME owners will always be there to help them get back up, no matter how many times it happens. FinTech ecosystems are full of startups that fail. No one seems to care. This is an area where everyone can go wrong. For them to succeed, they must have a clear vision and extreme resilience.
Castillo states, “Just because FinTech exists, doesn’t mean that SMEs are going to stop traditional banking. It’s a little naivety to think so.”
Many SMEs remain skeptical about what FinTechs can offer them. We are still in a trust phase. As SMEs become more digitally-savvy and more agile, as well FinTechs demonstrate their ability to operate in the right manner, mutual trust will increase.
The so-called FinTech Law, which has been established in various countries, is an important part of this trust. It legitimizes these companies as well as lays the foundation for understanding that money that SMEs take in or withdraw is from safe and regulated institutions. This is why FinTech and SMEs are now more compatible than ever.