Financial technology uses software to create innovative services. On a commercial level fintech is about lowering the cost of financial services, increasing speed and information flow while focusing on user experience. In 2016 there was $17.4 billion of investment worldwide and £743 million in UK. Moving into Q1 of 2017 the UK accounted for half of the top ten European investments in fintech companies.
The UK has a natural advantage for Fintech companies due to government support, high level of entrepreneurial talent and the recognition of the need to innovate. London dominates but cities like Edinburgh, Manchester and Belfast are increasingly involved.
So where are we seeing the change?
Fintech is growing through financial management, borrowing, banking/payments and credit/business analysis. There are a number of Catalysts which have sparked the change from traditional financing.
The Cloud – Cloud computing refers to computing services delivered over the internet which is hosted on a personal network. Cloud computing can be used to access and analyse data through dashboard views and predictive analysis solutions.
Algorithmic Decisions – Companies are now using algorithms to analyse data to save time and prevent human error. Businesses like Acorn Machine use algorithms for SME lending.
Pro Innovation Regulator – The financial conduct authority (FCA) has placed innovation and technology as a priority. Therefore instigating a forward-thinking approach to finance.
Data Availability – Fintech platforms pride itself on turning big data into smart data. These large amounts of Information at used in real time to make more strategic decisions and better protect their organisations. Big data can be used to a) assess and manage risk, ensuring that prospective customers banking status and history are both in order. b) combat fraud by allowing organisations to determine whether a potential customer is in fact who he or she claims to be, preventing liability and loss.
Examples of SME companies that have embraced fintech.
Accounting – XERO
Xero is a cloud based solution for small business. Founded in New Zealand in 2006 Xero is a $3.5 billion NZD company (£1.9m) with $300m (£163m) of revenue. The service allows business owners to easily keep track of expenses. Xero integrates your bank account with full reconciliation and has effectively made the role of bookkeeper redundant. This service utilises cloud software to work anytime, anywhere on any device.
Invoice Financing – Market Invoice
MarketInvoice allows businesses to receive cash in 18 hours compared to traditional funding which takes on average 90 days. They achieved this by simply allowing the business to take control of their cash flow by selling invoices online. A real-life saver for any organisation.
Factoring has been around for a long time but its technology that gives it the thrust. MarketInvoice finance over 15k every minute and as of October 2017 they have funded over £1.5 billion. Another fintech company that provides investors with the expected return 100% of the time.
Foreign Exchange – TransferWise
TransferWise is an online money transfer service which allows you to transfer money to up 8 times cheaper than traditional banks. Disrupting banks by offering pure peer to peer foreign exchange. Covering B2B and B2C TransferWise offer an efficient and professional user experience. Not only that but the site will save you a truck load of money. PCM research found that when transferring 2,000 euro you pay a total of £19.50 with TransferWise, compare that to £69.36 with a £25 fee when using Santander.
Payments – Telleroo
Telleroo is a modern, simple to use solution to the bulk payments service. Real time payments can be processed and tracked 24 hours a day through an online dashboard. As well as fast customer service through online chat tools maintains Telleroo’s excellent user experience