Unless you run a financial business, you might assume that the term “fintech” doesn’t mean much to you. After all, the word is a portmanteau of “finance” and “technology.” Presumably, it’s the financial space that should be focused on this current fintech revolution.
But as fintech’s booming investments indicate, these companies aren’t just disrupting the financial industry. They are offering solutions to address a range of pain points that non-financial businesses encounter every day. From lending to risk management, here is how fintechs could bolster your company.
Ken Anderson, vice president of sales and marketing at IntelliChief, says that although many companies have automated elements of their accounting and financial reporting processes, some essential functions fall through the cracks. Manual record-keeping, for instance, is not only time-consuming, it’s also inefficient in an environment that rewards quickness and agility.
IntelliChief provides an enterprise content management platform that enables companies to simplify and digitize all of their reporting and documentation processes. Anderson offers the example of accounts payable requirements, such as submitting accrual records on items purchased during a given financial period. These accruals may represent hundreds of thousands of dollars, but “there’s no visibility” when those are documented manually instead of recorded in a digital system, Anderson says. Platforms like IntelliChief’s enable businesses to save time and money by automating important reporting workflows.
Although non-financial businesses may be wary of partnering with fintechs or may not realize how beneficial those partnerships can be, that doesn’t mean the need doesn’t exist. “They know there’s a problem, but they don’t know there’s a solution to it,” Anderson says.
He says that leaders often believe fintech solutions are prohibitively expensive for their organizations. In the past, they may have been right. But as the market has developed, fintechs have created more affordable solutions that suit the needs of different-sized businesses.
“When this kind of technology first came out, the only place you saw these enterprise content management systems was in very large financial companies, so it was very expensive,” Anderson says. “The technology has certainly matured to the point where there’s a lot of competition in the marketplace.”
Fintech companies recognize the importance of risk management, and not just for financial entities. Non-financial businesses must also be vigilant about who their customers are, particularly if they’re working with lending companies to offer credit to prospective shoppers.
“This is about making decisions very quickly, and about membership for onboarding or for credit,” says Paul Thomas, managing director of Provenir. The company provides risk management and analytics software that uses both structured and unstructured data to assess customer risk very quickly. Companies such as GM Financial and Klarna now use Provenir’s Risk Analytics and Decisioning Platform to gauge customers’ creditworthiness for financing decisions.
Fast risk analysis matters because time is of the essence when converting customers. Processes that take hours or days can motivate buyers to seek faster-moving vendors, but quick decisions create new options for financing, which can help you keep customers engaged.
This is especially evident when it comes to e-commerce. “The challenge that [e-commerce companies are] really trying to overcome is abandonment in the shopping cart,” Thomas says. A customer might make it to your purchase page, but there is no guarantee that they will complete the purchase. If they haven’t saved their payment details with the site, they may have to put in their credit card numbers, addresses, and contact information. At any point, they may become distracted or fed up, and decide not to buy after all.
Thomas uses himself as an example of the former. An avid cyclist, he says he likes to browse—and occasionally purchase—new gear for his hobby. But if his partner asks him to do something around the house, he will prioritize her wishes over checking out. There is a good chance he won’t return to the item because he’ll become caught up in other concerns, and now the company has missed a sale.
However, a "buy now, pay later" option reduces the friction to purchase. Knowing they won’t have to locate their physical cards or log into another site makes people more amenable to buying their items. But companies can only afford to do that if they can get lightning-fast risk assessments to approve credit-worthy customers.
Thomas notes that Klarna uses Provenir to make such assessments to Overstock.com. By quickly analyzing information such as a customer’s name, zip code, and device and connection details, the company can provide a decision within seconds. Once approved, the customer can check out quickly and easily, not having to worry about payment until they receive an invoice.
One of the biggest blind spots non-financial companies have is their obligation to federal compliance laws, says Daniel Wager, vice president of global financial crime compliance at LexisNexis Risk Solutions.
“While they are not banks, nor should they be treated as banks or regulated as banks are, they do have exposure in certain areas of financial crime where they may not expect it,” he says. These areas include anti-bribery, anti-money laundering and sanctions laws. He notes that sanctions regulations are particularly concerning because the U.S. has stringent enforcement standards in this area, and many companies don’t realize they may be running afoul of the law. Companies that do business with sanctioned clients—even unwittingly—could face millions of dollars in penalties.
However, LexisNexis and other companies offer sophisticated, automated platforms for risk analysis and fraud prevention. LexisNexis Risk Solutions, for instance, analyzes new customer or client names against a number of risk prevention criteria. In addition to their names, which is the most common and fundamental check, it also examines digital attributes such as geolocation, IP address, device settings, and identity. The digital components are increasingly important because Wager says that sanctions evaders or money launderers will often use different names but that the “digital piece often persists.”
The benefits noted above are only a few of the ways in which fintechs can help non-financial businesses become more efficient, secure and resilient. However, many organizations continue to miss out on opportunities to improve.
“A lot of people running companies are not tech people. They don’t get it, they don’t want to know about it, and they’re a little bit scared of it,” says Alexander Lowry, executive director of the Master of Science in Financial Analysis program at Gordon College and an advisor to fintech companies. In other cases, company leaders may know there are opportunities to improve, but they’re concerned with more urgent matters. They don’t realize that fintech is all about making their processes “faster, better, and cheaper,” Lowry says.
Anderson says that companies often see return on investment on their enterprise content management systems within 12 months, if not sooner. But oftentimes, those that don’t suffer from a lack of clarity and team buy-in.
“The biggest barrier to looking at these types of things is the users. It’s the ‘this is the way we’ve always done it’ type [of] syndrome,” he says. “That’s probably the biggest hurdle they’re going to run into.”
Lowry agrees that including employees in the process is essential to maximizing a fintech platform’s benefits. They’re perfectly aware when there are problems or when a workflow is broken, he says, but they may be skeptical of new solutions that are foisted upon them without an opportunity for input.
“If you can tell employees, ‘We're fixing [the problems] you are bothered by all the time,' the employees will be excited about that and they’ll be involved,” according to Lowry. They will then be motivated to educate and better serve customers through the new process. “It’s sort of a virtuous cycle,” he says.
Whether your business has already begun partnering with fintechs or has been waiting on the sidelines, assess your current processes and identify which ones could use an upgrade. Finding the right fintech partner can help you save—and earn—more money, better help your customers, and better protect your business from substantial financial risks.