Fintechs Are Redefining The Industry Norms To Support Global SMEs

Financial institutions that want to satisfy the needs of tech-savvy customers have made digital transformation a major priority. The need for expensive and time-consuming development is removed, allowing traditional institutions to accelerate their digital transition.

The financial industry is highly regulated, and as a result, SMEs face significant entry barriers. In fact, the banking rule commission has made it easier for businesses to enter the market and compete favourably with banks.

To address this problem, fintechs have intervened. These nimble, tech-focused businesses have shown a remarkable aptitude for providing specialised services that match the particular requirements of larger SMEs.

Fintech Industry

Fintech is the term for the process through which financial services providers incorporate technology into their products to enhance the usability and customer experience. It essentially functions by disentangling these companies’ products and opening up new markets for them.

Companies in the finance sector have increased financial inclusion and reduced operating expenses by utilising fintech. Robo-advisors, payment apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps are a few examples of fintech applications.

Difficulties of Traditional Banking Institutions

Despite their size and reach, traditional banking institutions have been lagging behind and finding it difficult to assist small and medium-sized businesses (SMEs) with crucial FX issues like hedging, local accounts abroad, and payments in exotic currencies. As a result, SMEs are forced to deal with subpar services. This paradigm not only prevents SMEs from expanding globally, but it also exposes a missed chance for banks.

The challenges that traditional banks confront include a lack of attention to the SME market, complicated data problems caused by internal databases, and the weight of outdated internal systems. The systems are expensive to maintain, and they make it difficult for banks to react quickly to changing business needs.

According to a poll by HSBC, 70% of CFOs reported lower earnings as a result of avoidable, unhedged Forex risk. While the financial sector has embraced digitalization, particularly in the wake of the pandemic, FX risk management has clearly lagged behind.

How Fintechs are Equipping Banks to Support Global SMEs?

As a result, Fintechs are challenging industry standards by putting the customer first and being more flexible than traditional banks.

While financial institutions concentrate on a limited number of specialist sectors, other fintech companies grab the chance to fill unmet demands and research untapped areas. As a result of the increased merger and acquisition (M&A) activity brought on by this consolidation wave, fintech companies are seeking strategic alliances, purchases, or mergers to boost their competitiveness and diversify their product offerings.

Traditional banking models have been shaken by the quick development of technology, which has forced banks to be creative and adapt to new technologies. Financial institutions are aware that in order to meet client needs and keep on top of trends, speed and agility are essential.

Summary

When compared to traditional banks, fintechs exhibit a higher focus on the client and better adaptability, which is changing industry norms and, in a surprising development, actually enabling banks to help multinational SMEs. They actually take the time to work with clients, get to know what they need, and help them avoid risks related to price change volatility so they may expand and thrive globally.