Small businesses are an important part of the world economy. In America only, small businesses account for 99% of the industry employing around 47% of their population. Another report also shows that these businesses are on the brink of extinction due to the ever-growing eCommerce industry and increasing global outreach.
According to research by Goldman Sachs, more than 50% of the small businesses have less than 3 months of cash reserve. Furthermore, the mandatory lockdown due to the global pandemic has put a closed sign in every store. Even in good times, small businesses naturally operate with a thin margin of cash reserves.
Luckily, many new technological tools are emerging as a solution to these challenges faced by small businesses. Financial technology is one of them has been working in the uplifting of these small business industries even before the pandemic started and today that’s what we are going to explore: how these FinTech solutions can help in saving businesses.
1. Payment Processing
Way before this pandemic started, retail customers started opting and preferring plastic money over cash. As per a report by the federal reserve, approx. 61% of the US population prefers to pay with credit cards or debit cards at their local retail store. Mobile Wallets, another digital form of payment is also picking over cash among customers.
To increase the payment processing, small retail businesses needed a retail technology solution from which the bulky sales machines can be replaced. Digital Payment solutions like PayPal, Paytm, and Square came as a revolution for these businesses. These platforms are as easy-to-use as the plug and play services. Mobile businesses like food trucks or pop up clothing stores especially requires easy-to-transport payment solutions.
Ecommerce is another mode to uplift the dying small business industry. Most of these businesses were started in the 20th century and they are finding it hard to cope up with the giants in the zone leave alone the pandemic situation. Continuous evolution in the eCommerce industry has powered the small business to set up online shops easily. According to a report by Digital retailers, online sales in the US grew 16% in the year 2019.
Another report by Statista suggests that the Retail eCommerce sales will continue to grow each year until 2023, from $560 million in 2019 to $756.5 million in 2023. These businesses have a lot of options to choose from like BigCommerce, Shopify, and other eCommerce Platforms which also provide dedicated support.
Furthermore, some of the business owners are also opting for a new form of digital payment method, like cryptocurrency or Bitcoins where customers need not pay fees.
Due to the increase in FinTech Solutions, providing loans to small-to-mid-size Businesses (SMB) has become a lot easier and quicker. Offering extensive services like applying for loan VIA your smartphone, Online lenders eliminate the need of walking into a bank and going through the process for hours just to see your application get rejected.
PayPal started lending money as loans to SMBs and till May 2019 it has offered loans of $10 Billion to 225,000 Businesses across the world creating a new milestone in the FinTech industry.
Furthermore, Crowdfunding platforms like NetCapital, SeedInvest, and more from where SMBs can avail equity funding easily. According to research, SMB-committed Fintech Startups raised over $4 billion in 2019 in financing.
More than 140 Fintech startups are now available in the market that provide Accounting and Business solutions to the SMBs confronting their needs such as invoicing, expense tracking, processing payments, and payrolls. Small Businesses are now able to save a lot of money on accounting by availing Fintech solutions.
Tipalti, one prominent startup, helping in untangling the accounts payable. It is a cloud-based automated platform that allows a track of streamline flow of payments while providing access to currency converters, cross-border payments, and many such services.
What is the future of these small businesses? Where will Fintech go from here?
Fintech Solutions disrupted the common SMBs barriers like tiresome banking processes, high cost of the accounting process, and reaching common users more easily and effectively via their digital payment solutions. New reports suggest that new Fintech tools will be heading to small business applications. Currently blockchain power cryptocurrency, however, in the near future, blockchain will be used in confirming and authenticating users via allowing transparent transactions.
Fintech Solutions allows SMBs to concentrate more on its customers by providing a rich analysis. Digital Payment Solutions provides insights around customers buying patterns and power SMBs with data related to customer’s interests, and needs. Using this data, small businesses can improve their marketing strategies and increase conversions.
At OrangeMantra, our dedicated team works closely with leading financial services companies and banks in order to develop more futuristic solutions. The flexibility of OrangeMantra allows us to create creative solutions helping us in transforming Financial and Banking services. Fintech Solutions affecting SMBs is just a small feature of this industry. Check out the following article to understand the impact of Fintech in Financial Services.