How fintechs enable small retail stores to acquire a global audience

Financial technology, better known as fintech, is a term that encompasses new technology used to move away from traditional financial systems by providing a faster, more automated, or more efficient alternative.

While it is difficult for new technologies to innovate with traditional financial institutions, startups are starting to spearhead the fintech movement at a faster pace in the wake of the Covid-19 pandemic – offering a range enhancements and enhancements to the ecosystem that provides a more efficient way to deliver financial services to the market.

The disruption of traditional institutions has been an extremely competitive landscape in which banks have been increasingly forced to digitize their processes in order to keep pace.

As the data shows, venture capital funding in fintech companies accelerated to over $ 30 billion in the second quarter of 2021 alone, a total that surpasses 2017 in its entirety. This avalanche of venture capital funding in fintechs indicates that digital transformation is set to accelerate at an unprecedented rate in the coming years.

While digital acceleration is likely to be a challenge in the retail world – especially for retail stores that have spent much of their existence as a physical entity with less emphasis on e-commerce – the evolution of fintech has the potential to help stores reach a global audience online. With that in mind, let’s take a closer look at the potential of fintech and what it means for retail stores:

Solving modern challenges for retail

According to a 2019 survey by EY of more than 1,000 small and medium-sized businesses around the world, up to 25% were fintech enthusiasts. For the survey, EY viewed a “fintech adopter” as a company that had digitized its banking and payments, financial management, financing and insurance. Notably, an additional 22% of businesses were considered on the verge of becoming adopters due to the inclusion of three of the four specified categories.

While the survey found adoption rates to be highest in the banking and payments industries, closely followed by financial management, finance and insurance, this may be particularly beneficial for small businesses. and medium-sized enterprises because of their potential need for faster access to capital.

“The typical SME has less than a month of cash on hand. So when they need a loan, they tend to need it quickly, ”said Karen Mills, former administrator of the US Small Business Administration. “However, applying for a bank loan has always been an expensive process involving piles of paperwork and weeks of waiting for a decision.”

“By pulling large amounts of data from non-traditional sources such as bank statements, fintech is using AI and machine learning techniques to automate previously manual processes such as risk modeling and credit decision making. Mills added. “These automated processes reduce loan decision times from weeks to minutes, with funds flowing into a small business bank account within days.

According to Mills, the development of fintech services will help better protect the future of small retail stores – should another downturn reminiscent of the Covid-19 pandemic occur in the near future.

Manage payments without borders

The pandemic has accelerated the push towards cashless payments for retail businesses. While this process may have been intimidating for small retailers, the rise of fintechs designed to help businesses accept online payments from customers has helped ease the process as a whole.

In particular, the growth of innovative payment companies such as Stripe, PayPal, Circle, and Venmo has helped break down the boundaries between retail stores and online customers in a more efficient and secure manner.

On top of that, e-commerce focused fintech solutions like Shopify and Big Commerce have made it much easier for small businesses to build e-commerce sites to expand their reach. As an example, Shopify enables businesses to reach more global audiences than ever before through the integration of Facebook Selling. The platform also helps leverage customer credit card payments and allows businesses to integrate fully functional “buy” buttons on their websites.

Due to the significant venture capital funding fintechs have received in recent months, we are on the cusp of a new wave of even bigger financial features for small retailers. Two notable examples are Alchemy Pay and Connectum. Built on blockchain technology, Alchemy Pay integrates a hybrid approach between cryptocurrency and fiat money to take advantage of global cross-border payments with better financial control, greater efficiency, and much lower associated fees.

Connectum, on the other hand, pioneered one-click borderless multi-currency payments, equipped with electronic invoicing functionality and AI security systems that may be ideal for retailers wishing to accept payments from overseas. secure and fast way.

The next frontier for the retail-fintech relationship is to integrate blockchain technology into the ecosystem – providing more distributed and immutable levels of security and the prospect of free transactions without the need for middlemen. With blockchain applications in e-commerce continuing to grow in the wake of the pandemic, we could see blockchain fintechs disrupting the retail industry in months rather than years.

Improve data security

Data breaches are a threat to businesses of all sizes and in all industries. But in particular, small businesses in the retail arena may be targeted due to their perceived lack of the same comprehensive security measures that larger, more resourceful businesses rely on.

Additionally, as more small businesses embrace digital transformation in the wake of the Covid-19 pandemic, their exposure to security threats is also becoming increasingly digital.

According to data from Accenture, cyber attacks cost businesses about $ 243,000 per incident – and take more than 50 days to resolve on average. With this in mind, it is essential that businesses adapt to protect themselves in an online environment.

Already, we are seeing businesses turn to biometric payments through the acceleration of financial technology, where systems can automatically accept payments from a customer’s credit card based on a rapid fingerprint scan or facial authorization, which also helps eliminate friction during payments.

Fintech software that helps monitor online customer behavior is also becoming increasingly accessible and affordable, allowing businesses to develop more ways to report unusual activity before damage occurs.

While the digital transformation process can be an intimidating prospect for small retail businesses, the development of advanced fintech software and practices can pay off in helping businesses navigate the e-commerce landscape – creating an experience. fairer and frictionless for everyone involved.

Dmytro Spilka, technical and financial writer

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