From Buzzword to Business-Builder: 5 Ways to Put Fintech to Work in 2021

Fintech has long been a buzzword in the business press, with the latest digital wallet or bitcoin startups dominating headlines. In 2020, the remote world of COVID-19 accelerated the adoption of these technologies. Consider, for example, how contactless payment moved from a “nice to have” to “business as usual.” In Europe alone, the COVID-19 pandemic has caused a 72% increase in the use of fintech apps.

If your company isn’t already putting fintech innovation to practical use in your business, 2021 may be the year to start. Areas where such digital innovations can add value include:

Expanding payment options: When customers can pay their way, global businesses increase their sales conversions and revenues. Payment platform Yapstone, for example, offers access to over 140 alternative payment methods and multi-currency pricing in more than 140 countries. Dutch platform Ayden offers the ability to integrate these payment methods into a seamless, secure online checkout.

Accelerating cash flow: Particularly for smaller or more capital-intensive businesses, cash flow is king. The IMF report “The Promise of Fintech” illustrates with this hypothetical example of a factory owner:

“The owner tries frantically to obtain credit from his bank to replace his machine. Even though the factory has operated for several years and has a profitable track record, the bank is just too busy for this small client. … A few years ago, this could have been the end of the business. But a friend told him about an online lender. Within a week, the online lender had assessed the creditworthiness, approved the loan, and disbursed the money.”

Services like Ondeck can put loans and revolving lines of credit at a company’s fingertips.

Getting money to employees: As COVID-19’s virtual world continues to put a strain on the economic conditions and postal services, payroll is another area where fintech applications can drive business value. According to fintech research firm WhiteSight, areas to watch include salary on-demand and salary advance services, early direct deposits, and payroll via cryptocurrency.

Getting money to suppliers: Maintaining good relationships across the supply chain is more important than ever. Global businesses can use fintech applications to facilitate prompt, reliable payments.  Rapyd Dispurse, a service of UK platform Rapyd, offers the ability to pay vendors across borders and currencies.

Streamlining cross-border contracts:  With paper documents and in-person witnesses, traditional modes of business agreements were cumbersome and time-consuming even before COVID-19 shutdowns and stay-at-home orders. Smart contracts, with cryptographic keys as digital signatures and blockchain for authenticity and transparence, offer a powerful solution for keeping international business securely on track.

Do your due diligence

Just as COVID-19 expanded the demand for online financial services, the pandemic’s economic repercussions created choppy waters for business operations—and not all shiny new fintech startups will make it through to the other side.

To improve the odds of engaging with a survivor, investigate:

  • Is the business solvent? Even at the beginning of 2020, access to funding was becoming difficult for many fintechs, especially for early-stage ventures. Recent interest rate cuts and the economic slowdown have exacerbated this trend. Look for fintechs that are both shoring up their capital and funding and implementing cost-saving measures.
  • Is the company effectively addressing cybersecurity? COVID-19 and the sharp rise in remote work has heightened security vulnerabilities and brought an increase in cyber attacks. Particularly given the sensitive customer and financial information a fintech is handling, it’s essential to verify that a company has plans in place for threat monitoring, data protection, data backup, and disaster recovery.
  • Is the fintech compliant with current regulatory requirements? With global economic crises come increased regulatory scrutiny. In the on-line banking sector, for instance, lenders have been tightening underwriting standards to mitigate any potential rise in defaults. And the financial sector in general is one of the most highly regulated areas in the world. To mitigate your company’s risk, confirm that the fintech is keeping pace with compliance
  • Is the fintech investing in innovation? This will enable them—and your company, by association—to adapt to evolving customer demands and grow in the post-COVID-19 world. For example, ask how a potential fintech partner is growing its AI and digital capacities, such as building a workforce with the right skillsets and integrating new technology with legacy systems.

It’s also smart to keep an eye on the active fintech M&A landscape, which has recently included Intuit’s purchase of Credit Karma, Visa’s acquisition of Plaid, and American Express’ purchase of online lending platform Kabbage. Depending on the details of the merger or acquisition, this can change a company’s contacts, services, and terms.

Consider the long-term

The current environment may also be a good time to bring contactless payment and other fintech capabilities on board more permanently, in the service of strategic growth. When evaluating m&a opportunities, consider:

  • Will the fintech expand your customer base? Will it allow more people to buy more quickly and conveniently? Consider as well that many promising fintech companies have a laser-like focus on specific customers. This can range from consumers who are poorly served by more traditional companies to younger, higher-income consumers living in urban centers, who crave seamless, intuitive user experiences.
  • Will the fintech help open new markets? Research shows that over half of non-fintech users are unaware of these companies and the services they offer. Usage increases as awareness rises—look for a fintech that is proactively changing this scenario through investing in marketing and customer acquisition strategies.
  • Does the fintech offer a competitive alternative to established banks and businesses? This is another way to grow your business in new markets. Fintechs that tailor their services to small- and medium-sized businesses, addressing core needs such as bookkeeping, expense-tracking, insurance, and payroll, are one example.
  • Does the fintech run on modern digital-first infrastructure built for scale, security, and efficiency? Don’t gain cyber-headaches and vulnerabilities with your fintech acquisition. Look for a strong telecom infrastructure with reliable connectivity that enables data portability and machine learning. Such resilience and reliability also increases consumer trust in your company and user preference for its digital-first products.

If you’re evaluating contactless payment options and other fintech opportunities, specialized consultants and advisors can help. For more information, contact us.