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January sector focus: Fintech

using Fintech to make purchase in shopFintech is used describe new technology that seeks to improve and automate the delivery and use of financial services.
Originally the term was applied simply to technology employed at the back-end systems of established financial institutions.
Over time, however, the Fintech definition has been expanded to include any technological innovation in — and automation of — the financial sector, including advances in financial literacy, advice and education, as well as streamlining of wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management, asset management and some would now also include crypto currencies such as Bitcoin and their administration.
Fintech is also sometimes described as disruptive technology, in that many Fintech start-ups are designed to provide financial services in non-traditional ways, such as by offering online shoppers to secure immediate, short-term loans for purchases, bypassing their credit cards or by offering online and App-only services that bypass traditional lenders.
While traditional lenders and finance providers have tried to adopt some of the Fintech innovations, they begin with burdensome overheads and cannot generally compete unless they embrace the need to fundamentally change their existing thinking, processes, decision-making, and overall corporate structure. This is not something most managers can cope with.
There is now a vast array of Fintech categories of which the following are just a few examples:
B2C for consumer banking activities such as arranging loans and providing customer credit facilities,
B2B for small business clients (as above)
B2B for small businesses for activities such as taking payments, credit management and managing debtor ledgers
B2C for consumers for activities such as contactless payment and payment by mobile phone, online banking, applying for financial services such as a mortgage or loan, online shopping payments and many more.

Fintech as a part of the UK economy

In 2017 at the first ever International Fintech conference argued that the UK was the leader in this sector with a competitive advantage in the provision of Fintech services due to its sophisticated financial community and the growth of technology hubs like Silicon Fen in Cambridge and Silicon Roundabout in London.
The phenomenon was described as being an essential aspect of the UK vision for “an outward-looking, Global Britain” which would not only provide a high skilled, high wage economy but would attract the best talent from all over the world.
At that time, according to Treasury figures, the industry was worth £7 billion to the UK economy and employed an estimated 60,000 people.
It has been calculated that there are almost three times as many UK banking and payments companies now than there were in 2005 while the rest of the world has seen theirs fall by around one-fifth on average.
In May 2018, Technation reported their research in an article in Information Age that the UK’s tech sector, of which Fintech is a part, was expanding 2.6 times faster than the rest of the UK economy, with Fintech start-ups located not only in London but throughout the UK.
The Technation analysis also looked at the impact of Brexit on the sector, finding that by and large tech firms were undaunted by the prospects of leaving the EU.
However, Financierworldwide, provided a more sober analysis, identifying some of the potential challenges to Fintech.
These included future freedom of movement of labour and the absence of sufficient numbers of skilled tech workers available in the UK, the loss of the ease of the passporting of services to other EU markets and consequently the decision Fintech companies may face of whether to relocate to other countries in Europe, at least in the short term. Among the cities expected to be most likely to benefit from welcoming such moves are Dublin, Paris and Berlin.
There is also the worry that the loss of passporting rights after Brexit would deter the currently high levels of investment in UK Fintech.
Finally, regardless of Brexit, if Fintech is to thrive, after a year of seemingly frequent banking technology meltdowns, not to mention hacking scandals, there needs to be much more robust and secure protection against fraud and data protection. To achieve this we at K2 have invested in Tricerion as the future of login security. Check it out at www.tricerion.com.
 

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Accounting & Bookkeeping Banks, Lenders & Investors Factoring, Invoice Discounting & Asset Finance Finance General

Fintech for SMEs

Fintech mobile phone bankingFintech is a topic much discussed in business publications, often in hyperbolic terms, but very few can define it precisely.
Initially, Fintech, short for financial technology, was the word for the technology used in the plumbing as the back-end of established consumer and trade financial institutions.
However, according to the online financial dictionary Investopedia, Fintech now denotes a range of technological innovations in the financial sector, including in financial literacy and education, retail banking, investment and crypto-currencies like bitcoin.
This wider definition more accurately describes the range of possibilities for SMEs to use financial services and engage with the financial sector especially as some Fintech services, we would argue, are revolutionary and open up services that were previously only available to large companies.
Part of the problem lies with the mainstream banks, lenders and most of the traditional suppliers of financial services including factoring, invoice discounting, fund raising and advice, who have remained deeply conservative in the way they do things and the way they charge for their services. Many have not benefited from the technology revolution, or if they have they haven’t passed on that benefit to SMEs.

How can SMEs benefit from Fintech?

SMEs can benefit from significantly reduced costs by bypassing traditional ways of using financial services, and in many instances by bypassing the traditional suppliers.
Fintech has done much to disrupt traditional models, for example, peer to peer lending via firms like Ratesetter and Zopa and equity crowdfunding via CrowdCube or Seedrs has grown. These online platforms now provide alternative sources of lending and investment to SMEs who no longer need to use their bank or finance brokers to fund their business.
Entrepreneurs can, via an online platform, pitch directly to the world for loans or investment in their companies and ideas. While they may still have to produce a sound business model and show that there is a market for their idea, online models can speed up the funding process dramatically.
Another benefit of Fintech has been mobile payment and currency conversion as innovative methods of swiftly and economically transferring funds across geographical borders. Online and cross border payments are undergoing a secondary Fintech revolution with Blockchain technology and crypto currencies like Bitcoin and Ethereum gaining traction.
Blockchain, as an open, distributed ledger system that records transactions between two parties efficiently in a verifiable and permanent way, is likely to fundamentally change the way we do business and offers opportunities that none of us have yet considered.
Payment systems, such as Go Cardless, Paypal and Stripe alleviate the cost and bureaucracy of invoicing and collecting payment, removing the need for debit cards, credit cards and expensive merchant service accounts.  This is of benefit both to consumers buying online and to businesses selling goods or services to consumers and to other businesses.
Other areas where Fintech offers fast and efficient services are in monitoring, tracking and managing accounts and financial transactions. Mobile technology provides users with information in their hand to provide accurate information and allows entrepreneurs to make timely decisions.
Finally, for those who have the skills and knowledge, the opportunities for developing ever more innovative and useful Fintech ideas and converting them into a viable business are only going to increase.