Yet, in an effort to achieve the largest ROI, legacy bank
policies tend to favour larger businesses or consumer goods. In 2018, J.D.
Power found 37% of small business banking customers felt their banks
appreciated their business and only 32% felt their banks understood their
business.
In the wake of pandemic-induced quarantines and social
distancing, the search for adequate funding and opportunities to minimise costs
are at an all-time high.
As banking customer loyalty continues to dip, the fintech
evolution has drastically shifted customer banking preferences with more
convenient and reliable solutions. It has also given rise to a wealth of
options that are no longer limited to local financial institutions.
A recent study conducted by the Swiss Finance Institute
found the daily average rate of fintech app downloads has increased from 29.2%
to 32.8% during the COVID-19 pandemic.
With the rapid, global acceleration of digitalisation of the
finance industries and the emergence of disruptive innovations, regulatory
revisions and digital wallets, small businesses now have access to a plethora
of improved digital tools that can drive big results.
High fees challenge
One of the main complaints of small businesses against
traditional banks is the high fees ranging from those associated with the likes
of account maintenance, foreign transactions and money transfers.
Most digital-first and digital-only financial companies are
able to do away with the majority of these costs because they are free of
looming brick-and-mortar overhead costs. For example, the newer fintech
category of neobanks, or challenger banks, offer many of the same services as
legacy banks including checking accounts, credit cards, loans and refinancing
sans the long lines and archaic stacks of paperwork.
Similarly, online lending firms provide seamless service to
customers who are often ignored by legacy banks with quicker approvals,
personalised payment options and fewer requirements.
Peer-to-Peer (P2P) payment technologies also took a chunk
out of legacy bank profits at the top of the pandemic because they were better
positioned to facilitate the surge in contactless transactions as many small
businesses transitioned sales of services and goods to online platforms.
P2P platforms have proven to be invaluable investments for
merchants looking to reach the banked and unbanked as more people rely on them
for various money transfers, direct deposits and financial transactions and
bill payment processing.
Other popular e-commerce payment platforms, specifically
designed with small businesses in mind, are also beginning to roll out features
that mimic traditional bank offerings such as corporate debit cards, small
business loans and fraud protection.
Using BNPL to attract incremental consumers
With the lockdown shuttering many brick-and-mortar stores,
many entrepreneurs shifted their services to digital platforms which
contributed to the exponential explosion of online shopping and the resurgence
in popularity of buy now, pay later (BNPL) options.
With consumers feeling the pinch of the economic downturn,
instalment payment options have become a staple for consumers who do not have
access to credit or do not want to use a credit card. It is also a valuable
tool to attract Millennial and Gen Z consumers who prioritise ease and
convenience in their shopping experience.
As the BNPL industry is projected to reach an estimated 79.7
billion by 2024 according to the New York Times, more small business owners are
tapping into the trend to attract incremental sales at a time when every dollar
counts.
The rise of blockchain
In the midst of the pandemic, blockchain technology has
blossomed into a mainstream disruptor. As small businesses struggled to attain
financing, leading to the creation of the Paycheck Protection Program in March
2020, more owners looked to blockchain for streamlined cryptocurrencies loans.
Small business owners also appreciated that credit
worthiness is more readily confirmed without the use of applications. Maybe
most importantly, blockchain technologies provide transparent and secure
transactions which also helps entrepreneurs with more efficient customer
tracking processes.
The future is indeed digital
Disruptive technologies have given rise to digital tools
that should be embraced by small businesses to successfully navigate the
economy that is becoming increasingly dependent on these new fintech tools.
Furthermore, they can drive revenue and the brand affinity
business owners crave if wielded correctly. The ease and speed of many of these
fintech platforms will be appreciated by customers long after the pandemic has
ended.
As the world becomes increasingly technology dependent, the
businesses who are able to demonstrate digital agility will be better equipped
for long-term success.
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