Fintech is making a huge impact in the B2C (business to consumer) marketplace in a variety of ways. But what about the B2B (business to business) market? Though somewhat overshadowed by their consumer counterparts, B2B fintech firms are seeing greater interest from venture capital, private equity and strategic investors in the past year or two. There are many aspects of the business process that can be improved by financial technology. Here are five of the most important fintech applications for any business!
Cash Flow Processing
Cash flow is one of the bright line determinants of success for businesses of any size. Having access to reserves of liquidity when they are needed will determine a business’ strategic options at any given time. Fintech companies like SmartDebit are increasingly focusing on developing secure and easy payment management methods for the B2B market. These systems allow for the processing and handling of a multitude of payment sources and currencies, including blockchain-based currency like Bitcoin. Fintech-powered cash flow management also allows businesses to keep exact control over the date of payment, ensuring that their predictions for cash flow remain accurate no matter the circumstances.
It could be considered a subset of the cash flow process, but electronic invoicing has an impact on businesses all its own. Being able to move from paper invoice ledgers to digital systems using apps like Freshbooks or Harvest is not only a boost to business process efficiency, but a significant operating cost limiter. The automation of invoicing also allows for robust data collection. This in turn lets businesses track, analyze and improve their processes with each new invoice. Digitally accessible invoice records may offer additional benefits when businesses are required to submit vital compliance information, as well.
The word “blockchain” refers to a dense set of protocols for distributed ledger technology, and has applications that range widely – so much so that they likely deserve articles of their own. One of the most powerful applications of blockchain technology to the business world is in the security sector. There has been a massive proliferation of blockchain oriented firms of late, some of which include SmartContract and Xage. Blockchain has evolved into a reliable technology that allows businesses to facilitate secure transactions without any third party authorization. At any given time, all the transaction records in the “block” or ledger must add up, and due to the distributed nature of the ledger, it is virtually impossible to generate sufficient resources to bypass this security measure. As such, businesses can drastically improve the transparency and security of their transactions by implementing blockchain solutions.
Traditionally, international payments have had to be routed through multiple banks, resulting in delays and high fees. Financial institutions, on the other hand, have had to invest in manpower to manage liquidity, foreign exchange risks, and other challenges associated with the transfer of funds across borders. Fintech firms such as Payoneer and Transpay allow banks around the world to network and improve the efficiency of their processing such that international money transfers can be accelerated, often to same day turnaround.
Business Financing and Lending
In its June 2016 Report on Key Small Business Statistics, the Canadian Government Department of Research and Business Intelligence noted:
“Given their role in the economy, it is important that [small and medium sized enterprises] have access to the financing they need to grow and thrive. Insufficient access to financing can lead to liquidity shortages, stagnant growth and reduced market competitiveness. Firms rely on financing to pursue new innovations and expand into new markets. As such, the state of firms accessing financing is an important indicator of overall economic health.”
The report looked at the demand for funding at critical junctures in a business’ life cycle, such as during the start-up phase and during the process of making a business acquisition. It found that 51.3% of all small to medium sized enterprises (SMEs) sought out some form of financing, and that by and large the most significant source of funding for startups as well as for business acquisitions fell under the relatively informal category of “Credit from Personal Financing” – essentially defined as personal loans taken out by business owners.
Fintech firms including Progressa’s sister firm, Merchant Advance Capital, are increasing the availability of B2B financing to firms for whom the traditional bank-to-business relationship is either inaccessible or not ideal given business objectives. Not only is access to financing increased for these businesses; so too are the terms and conditions of this financing able to be tailored to the needs of individual businesses, delivered on a schedule that allows them to grow and innovate rapidly.