Business

How to choose the right fintech for your business

opinions expressed by entrepreneur Contributors are their own.

The number of fintech companies has exploded in recent years. In 2021, global fintech investments totaled $210 billion with 5,684 transactions completed. But it’s not just about the overall size of the fintech market; We have also seen a sharp increase in the number of fintechs – there are 454 fintechs in the UK alone. The same thing is happening in Asia – 600 fintechs operate in Hong Kong. This development is even referred to as the digital big bang.

This increase in fintech numbers has been accompanied by an increase in the diversity and specificity of fintech offerings. As a general theme, we see a shift away from consumer-facing products towards business banking – particularly fintech solutions for small and medium-sized enterprises (SMEs).

Here I go over the most important things that an SME should consider when choosing a fintech.

Read more: Fintech leads in fair lending practices with a new kind of “relationship banking”

From neo-banks and challengers to neo-niches

“Challenger Banks” and “Neobanks” were the first generation of fintechs to take on the big banks. The challenger banks went straight to the bull’s eye – they offered direct banking services against traditional banks. The neobanks offered some services similar to banks, but without a banking license. The goal in both cases was to provide a service that reflects a traditional customer banking experience, but with a more user-friendly interface and offerings. Regulators quickly adapted their rules to support challengers and neobanks in jurisdictions around the world, such as through dedicated sandboxes or specific virtual banking licenses.

As the fintech market has grown, unsurprisingly, we’ve seen an increase in market segmentation. A new wave of neo-niche fintechs has arrived and they are making strides against the challengers and neo-banks. Neo-niche fintechs focus on selected, highly specific and underserved target customers.

A neo-niche fintech’s focus is often demographic: it could target its products at minorities (e.g., Islamic banking), unbanked populations, LGBTQ+ customers, or high net worth individuals (so-called “wealthtech”). And that approach is starting to pay off – by targeting a more specific audience, neo-niches are developing loyal and engaged customer bases.

Sometimes the niche is not based on demographics but on the fintech product itself. This is known as vertical banking. Through vertical banking, the fintech can specialize in business lending, currency exchange, payments or investments.

The proliferation of fintechs is of course good news for companies. This means there are increasingly bespoke options to meet their needs. But at the same time, they face the paradox of choice: how to choose a fintech provider when there are so many choices.

Read more: Fintech’s New Era: Profits, Perils and Limitless Potential

What are the most important factors when choosing a fintech?

Although not exhaustive, here are some of the most important factors to consider when choosing a fintech for your business:

  • bundling of services. You want a fintech solution that can deliver the specific services you are looking for. For example, if you intend to make regular spot transactions in foreign currencies, you need a fintech that offers this service. While neo-niching means you can likely source a different fintech for each service if you wish, it often makes sense to choose the provider that can offer you most of the services you need at once.

  • pricing. While it’s not the only variable to consider, price is still important. However, don’t just focus on the number, also consider how transparent the company is with their pricing. For example, does it require minimum deposit amounts? Is there a one-time fee for currency conversions?

  • Customer service. One of the biggest factors driving consumers away from traditional banks was their shocking customer service. Does the fintech provider you are considering have good reviews online? Does it publish its average response times?

  • Multiple Currencies. In our global world, it is becoming increasingly common for a company to trade in multiple currencies. If a fintech offers a multi-currency wallet, check what currencies are available and what FX fees they charge.

  • jurisdiction. Traditional banks often have strict rules regarding the residency of applicants. It is important to check whether a fintech provider is allowed to offer products in your location. Also think about the implications of moving your business to another country at a later date.

  • paperwork. The key to fintech’s value proposition has always been “do everything online”. Check the fintech’s registration process and whether a time estimate is provided. Fintechs should offer a seamless and hassle-free onboarding experience.

  • Security and Privacy. Fintechs hold some of your most sensitive corporate assets and data. You must verify that they have taken all necessary safeguards and safety precautions.

As the fintech market has grown, fintechs are no longer generic consumer alternatives to old-fashioned banks. There are now fintech solutions for virtually every potential demographic and specific service a business needs.

Read more: Get ready for a talent migration from banks to fintech

https://www.entrepreneur.com/article/422790 How to choose the right fintech for your business

Brian Ashcraft

TheHiu.com is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – admin@thehiu.com. The content will be deleted within 24 hours.

Related Articles

Back to top button