7 Innovative Fintech Solutions Revolutionising Business Finance

Financial technology – fintech – is not a new phenomenon in the world of finance. Fintech goes back to the introduction of the first credit cards and ATMs, then on through the dawn of electronic bank transfers (SWIFT) and into the arrival of contactless retail payments. However, the internet age has created rich opportunity for a new breed of disruptive financial providers, an elite group of relatively small, tech-heavy businesses who wear the ‘fintech’ badge with pride. Their agile presence has had a profound effect on the way businesses and consumers conduct their financial activities, challenging the legacy banks and shaping everything from pay-by-phone to faster forex transactions, enhanced security, and greater account control.

The impact of fintech solutions on financial services has been most pronounced for business users. Let’s take a closer look to see how fintech has improved the world of banking for the UK’s SMEs.

Why Has Fintech Exploded in Recent Years?

Fintech as a sector has grown exponentially since the turn of the century. A potent mix of high-speed broadband communications, cheaper, more powerful data storage, the invention of the smartphone, and large swathes of venture capital cash have given opportunity to tech entrepreneurs who saw an old, inefficient banking sector that was ripe for disruption, expansion, and improvement. Consequently, there are now more than 1,600 fintech companies in the UK, a number projected to double by 2030, and together, they contribute an estimated $13.4 billion (£11 billion) and over 76,000 jobs to the UK economy.

Since the 2007-2008 Financial Crisis, fintechs have found themselves less encumbered by heavy regulation than the legacy financial institutions. This has created niche openings that the more agile and innovative fintechs have slipped into and then rapidly expanded to create vast chasms between themselves and the banks in terms of end user cost, product performance, and technological advancement. The end result is a financial world improved to the point of being unrecognisable from the business banking landscape of only 20 years ago. Is this an overstatement? See for yourself when you consider the seven revolutionary fintech solutions below:

Innovative Fintech Solutions for Businesses

Faster, flexible, cheaper, better – the common features of the fintech business banking sector.

1. Alternative Finance

Alternative financing refers to funding and financial solutions from investors, lenders and service providers outside the legacy banking industry. Only a couple of decades ago, businesses in need of funds or specialist financial services had only one viable option – their high street bank – a source that was typically slow to perform, expensive to deal with, and unwilling to move outside tight lending guardrails. The result was often disappointment and stifled growth for the business customer. Now, large numbers of fintech companies have stepped into the void. Often working 24/7 and offering a far larger range of financial products at lower cost, these agile financiers are frequently more willing to consider innovative business proposals and offer fintech solutions that better match a business’ needs. Typical alternative finance products include small business loans, asset-finance, merchant cash-advances, factoring, start-up loans, and foreign currency exchange.

2. RegTech – (Regulatory Technology)

According to a LexisNexis report, the cost of financial crime compliance for all financial institutions in the globe’s major markets was $213 billion in 2022, up by $33 billion from the year before. These costs are factored into institutional overhead and in turn, they impact the cost of banking for businesses worldwide. RegTech – a fintech solution comprising a mix of big data, AI, and machine-learning technology – is being deployed to reduce the burden on financial institutions by offering real-time data and insights, as well as providing powerful reporting tools. Lower workload and greater security means less cost and better opportunity to assist financial needs. UK businesses reap the benefits of this with lower fees, faster transactions, easier international transfers, and more meaningful due diligence.

3. RPA – (Robotic Process Automation)

Once upon a time, financial institutions relied on expensive, manual input to control billions of transactions and account demands a day. This drove up banking costs and absorbed manpower, reducing banks’ ability to engage with customers, which in turn meant high fees and poor service quality for UK businesses. In contrast, fintech companies introduced RPA, a form of sophisticated machine learning, to clear the onerous, repetitive and simple tasks necessary to operate a maximum-efficiency financial platform. By creating and deploying a software robot with the ability to automatically launch and operate other software, RPA removes most human input, allowing employees to focus on their customers and other high-return tasks. Where fintech leads, the banks have followed. Businesses benefit with lower fees, faster service and a greater choice in the financial products readily available.

4. Open Insurance

Most of us are aware of ‘open-banking’ – the unbundling of the architecture that controls the globe’s banking system from the exclusive grip of the banks. This move has allowed more innovative, nimble providers to enter the market and offer new financial products and services to customers. Open insurance works in the same way, but for insurers not banks. Open insurance requires legacy carriers to open their data resources to other organisations and to share and consume data and services from many sources and industries. The result has seen the arrival of new fintech companies who operate in what were niche insurance markets for the major carriers. Covering business fields as varied as private hire insurance, retail insurance, and freight insurance, these new providers have expanded the coverage options for UK SMEs, creating greater transparency in the calculation of premiums and prices, and lifting the quality of customer service for the insurance industry as a whole.

5. Neobanks

Neobanks are, literally, new banks - app-based providers, operating in the digital banking space, and often working on a 24/7 basis. Having broken the grip that legacy banks grip on so many of the financial services and products that UK businesses need, neobanks are now driving down the costs of borrowing, creating more opportunities for investment, expanding the range of financial solutions available, even opening access to lower exchange rates and low/no ATM withdrawal fees worldwide, (a particularly valuable benefit for businesses engaged in cross-border trade and for the business executive when travelling).

6. Neobrokers

If neobanks have changed the landscape of the business banking industry, neobrokers have done the  same thing for trading. Not so long ago, investing in assets such as stocks, bonds, gold and currencies meant using the services of a traditional broker. Service costs were high and there was minimal transparency with regard to prices, market movements and trends. The arrival of neobrokers turned this situation on its head. Operating user-friendly trading platforms, these fintech disruptors provide fast service at low cost and give the investor a high level of transparency. Capable of digitising and tokenizing the traditional asset classes, plus illiquid ones such as real estate or private equity, neobrokers allow investors to participate in the stock market with only a small amount of money - a transformation that has widened the customer base and created great demand. The neobroker industry is projected to be worth $12.5 billion by 2028.

7. Embedded Finance

The explosive growth of ecommerce has driven the need for faster, more secure and more convenient ways for customers to pay for the things they buy. Embedded finance is a solution to this need. Combining the offering of a non-financial service provider (such as a retailer), with a financial service (such as payment processing), embedded finance allows non-financial businesses to integrate a financial service directly into their operation. This is most frequently seen with online payments, where an embedded service links directly to the customer’s bank account via an API (Application Programming Interface). A good example of this is Uber, where their embedded payment app lets riders pay for taxis without needing to continuously enter their details or authorise anything with their bank. Riders don’t even see a different payment screen when the transaction is taking place. Seamless financial integration eliminates the third party bank or lender in business and consumer transactions. This makes the process faster, cheaper, safer and more convenient, creating opportunities for organisations and enterprises to open new revenue streams and upgrade the services they offer to their customers.

Brave New Banking World – Fintech has Improved the Business Banking Experience

Without doubt, the beneficial impact of fintech for UK SMEs has been enormous. As well as the areas detailed above, new tech-heavy players are improving the ways businesses operate in fields as varied as forex, accounting, tax compliance, importing and exporting, and the trading of stocks and bonds. A business financial landscape that was once slow, costly and difficult to navigate, with the gate keys held by a handful of legacy financial institutions, is now a faster, cheaper and more open playing field populated by a wide variety of specialist and generalist service providers. Never mind the ‘Six Million Dollar Man’, fintech is the $13 billion dollar juggernaut making UK business banking ever-faster, stronger, and more effective.

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