As a business owner, you may have seen the word “fintech” all over the internet, being used by an accountant, a peer or even your bank manager – maybe you didn’t want to ask “what is it?”, so here is a very simple guide to fintech:
Fintech is essentially the forging of two words – financial & technologies – and that is exactly what it is! It is technology used by a financial services provider (often a lender) to improve their business in some way. We have now seen the advent of “fintech businesses” which is a financial services business that is centred around the technology.
These businesses are generally more recent than your high street banks and use technology to try to disrupt the industry, providing customers with an alternative rather than waiting for a bank manager to consider an application for finance for several weeks. They often use the technology to help in decision making through algorithms.
What does it mean for you?
Well, in a market that has been monopolised by a small number of banks for such a long time, the vast influx of these lenders into the market creates competition which can only be a good thing!
More lenders competing for your business can only drive down price and drive up service and flexibility.
The biggest difference with a fintech lender is often speed of delivery. If historically you had an opportunity (say the potential to purchase stock at a vastly discounted price if you bought it in 48hrs) then you needed the cash in bank or you would have to let the opportunity go. Now, however, you can access funding from a lender sometimes in as little as 24hrs, you have the ability to be more entrepreneurial and borrow the money quickly to take advantage of the opportunity.
Is there a downside?
Well not really – more choice never really has a downside. These lenders don’t have the history of customer deposits so the cost of their finance is often more expensive than a bank but as long as the offer is transparent then you have an informed choice to make – pay a little more for quicker and more access to funds or wait for your bank…
I’d always recommend that when looking for any form of finance, you speak to a trusted, independent funding advisor, somebody that knows the market and can source multiple options and shortlist for you to consider – this saves you time and also ensures you get independent advice so access to the most suitable funder for you.
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