4 Ways Fintech is Empowering Small Businesses in 2024

Consider, for a moment, how finance and accounting processes were managed historically.

Fifty years ago, keeping your books meant laboriously entering transactions in a paper ledger with a pen or pencil, then adding up endless columns of numbers. Getting paid meant waiting for a check — or possibly cash! — to arrive by mail. Then, you had to take that check to the bank and wait in line to deposit it.

If you needed a bank loan, that meant spending days compiling all the documentation needed and waiting weeks or months to hear if your loan had been approved. Forget about doing any kind of financial analysis or cash projections — who had time for that when compiling those numbers took precious time away from running your business?

Today, you can do all of that and more with your phone or tablet in minutes. Let’s take a look at the ways that fintech is helping small and medium-sized enterprises (SMEs) in 2024. 

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What is fintech?

Fintech, as Investopedia defines it, is “new tech that seeks to improve and automate the delivery and use of financial services.” Fintech uses computers, software and algorithms to provide financial services to consumers and businesses, giving them faster access to their money and real-time insights that help them make better decisions about their money.

Early on, fintech was limited to huge global organizations that could afford massive room-sized computers to handle back-office operations. Like much of the technology revolution, fintech is democratizing access to services that were previously only available to the biggest companies and the wealthiest consumers. 

An extreme example is the success of M-Pesa in Kenya, a mobile phone-based banking system that has given millions of people access to financial services. Rather than wait for traditional banks to build offices and branches in rural areas, M-Pesa leverages a tool that nearly every family has access to — a mobile phone. Simply by providing families a safe place to keep their money and making it easy to send money to family members, millions have improved their standard of living.  

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Fintech gets your accounting done faster

Today’s accounting software connects to your bank to make it easier for SMEs to keep their own books. Keeping your accounting data in the cloud rather than on a desktop server enables you and your team to access your books anywhere, anytime from almost any device.

Bank feeds and automation mean you can keep your books updated in almost real-time rather than spending hours on error-prone, time-sucking manual data entry and performing mind-numbing bank reconciliations. With better information, business owners can see trends in their data that help them make changes quickly instead of waiting until it’s too late. 

As your company grows, extending your accounting ecosystem by adding apps gives you the insights and bandwidth of a much larger accounting team, but with a much smaller headcount. Adding account reconciliation software helps you close the books faster and more accurately. Other specialized tools can help with lease accounting and financial planning.  

READ: 5 Things That Make Financial Planning Fun

Fintech gets you paid faster

Of course, cash is the lifeblood of every SME, so anything that helps you get paid faster is vital. Electronic payment options exploded during the pandemic as businesses moved online and consumers were eager to pay without touching anything that could potentially spread the virus.

While Paypal was one of the first companies to enable digital payments, today it’s only one of many options for digital payments. Extending online payment options to your customers reduces transaction costs while providing better customer service. 

Many accounting software packages incorporate online payment options in their invoices, which can mean payment within hours, not days or weeks. And because those payments go directly into your bank account, you no longer need to stand in line to deposit a check. 

Fintech gives you more access to banks and loans

Fintech improves access to lending and financial resources for SMEs, which was crucial in the U.S. for getting government stimulus funds to business owners during the pandemic. Large banks struggled with creating online portals and many initially focused on their biggest customers. However, fintech firms such as Kabbage, Fundera, and Lendio were able to step in and quickly get funds in the hands of SMEs, many of which lacked banking relationships. 

Banks and credit unions tend to see SMEs as risky borrowers. But fintech lenders are stepping into that gap to provide more options, especially for SMEs seeking loans under $50,000. Using a combination of AI and automated processes, these lenders can approve loans in minutes or hours, not days or weeks.

Digital-only banks, also known as neobanks, don’t have the expensive infrastructure of bank branches or legacy hardware to weigh them down. This very lack of infrastructure means they can serve customers where they are and with the technology they have, as the example of M-Pesa demonstrates.

Fintech is becoming an all-in-one financial resource for SMEs

Increasingly, the lines are blurring between these three categories: Banks like TD are offering small business accounting along with business bank accounts, and accounting software companies such as QuickBooks and Wave are offering banking and lending services. Digital payment apps connect to accounting software to allow customers to pay by clicking a button on an emailed invoice. 

Above all, fintech is removing friction from business processes by making it easier for customers to do business with small businesses. By automating tedious and error-prone activities, fintech is giving business owners the time and bandwidth to do more of the work that matters to their businesses. 

Stefan is the Accounting Operations Evangelist at FloQast. Previously, Stefan served as the Corporate Controller for Kodiak Cakes, a private equity-owned, leading consumer packaged food company, and as a Controller for Skullcandy, a multinational headphone CPG. These positions followed his five years at KPMG. His experience includes ASC 606 implementation, reduction of financial close timelines, accounting operational improvements, business combinations, financial statement audits, SOX audits and implementation, management reporting, debt, treasury, and systems integrations/implementation.