You don’t have to read many recent articles to know American
companies face a tough road ahead. From out-of-control inflation to supply
chain woes, few industries are not taking it on the chin in 2022. Even the
Silicon Valley colossi are having a hard go of it. Seemingly indefatigable
Facebook is considering layoffs. Google is advising its workers to be “more
entrepreneurial.”
If these economic leviathans—raking in billions monthly—are
flailing, what hope do America’s small businesses have?
The news is not all bleak, however. A new wave of companies
is combining the best of the financial and technology sectors into a hybrid industry
called fintech. Even better, they’re enabling small businesses to not only stay
alive, but also thrive.
But first, why should we care about the little guys?
Big business gets more headlines, but small businesses are
the American economy’s lifeblood. As Martin Rowinski wrote for Forbes earlier
this year, “No matter how small it starts—one, two, five, 10 employees—within
that town, the city or the county, your small business creates new economies
where once there was nothing.” Likewise, the Small Business Association (SBA)
reports companies with fewer than 500 employees comprise 99.9% of all American
businesses, leading to a simple question: Why do both financial institutions
and tech outfits make it so hard for small businesses to succeed?
These financial difficulties are more than familiar to
anyone who has ever launched a business. Banks and the like proceed at a
snail’s pace, yet startups must “move fast and break things”—to borrow a
phrase—if they ever hope to triumph. Compounding the problem is Big Tech’s
increasingly hostile stance toward small business as it seeks new revenue
streams. Example: Google now forces small businesses to pay to use its G Suite,
which it once provided gratis.
In these challenging times, small businesses would do well
to seek alternatives to both traditional finance companies and Big Tech
machinations. The trick? Finding the right alternative. Enter alt-tech. It’s a
broad term for a range of products and services springing up in innovation hubs
such as Austin, Texas, as well as in basements and garages around the nation.
Building upon my discussion of alt-tech in previous articles,
including the threat of financial de-platforming, how to take back photo
sharing from Mark Zuckerberg, and the need to keep AI working for the good of
mankind, I set out to determine how such disruptors can benefit small business
owners.
The answer is clear.
Companies operating at the nexus of finance/tech, an
industry known as fintech, are positioned to help America’s small businesses
weather the coming storm. As it turns out, the best fintech companies operate
miles away from what most Silicon Valley companies seem to care about:
ingenious ways to steal our attention and exploit our data in a surveillance
capitalism model.
Instead, leading fintech companies aim to decentralize key
areas of finance, including digital lending, payments, blockchain, and digital
wealth management. Let’s consider each of these pillars to understand how
fintech can right this (sinking) American ship.
Pillar 1: Digital Lending
You’ve probably heard of Web 3.0, to be built upon
innovations like the metaverse. You may not be aware of Lending 3.0, a
disruption to business as usual, emphasizing online services not affiliated
with traditional banks. Fintech company Marqeta recently published a report on
digital lending showing Americans are more than ready for a lending revolution.
Consider these stats from Marqeta’s research: 70% of
respondents believe the experience of getting a loan is a decade behind online
banking. 80% think traditional lenders try to hide a loan’s true cost, and more
than half say it takes too long to get money after loan approval. All these
concerns matter to small business owners. Been grilled about your personal
credit before getting a loan critical to your operations? Then you probably
think there’s a better way.
In its future state, digital lending, powered by effective
fintech platforms, could facilitate quick peer-to-peer lending with complete
transparency as well as high trust and safety. Why deal with a bank when there
are better capital sources with less hassle, reduced costs, and eventually,
higher trust?
Pillar 2: Payments
Companies facilitating renumeration are perhaps the most
familiar corner of fintech. Most people have used PayPal, Venmo, or Zelle to
place an order online, pay a friend back for lunch, or send money to relatives.
These companies have become so mainstream they’re no longer avant-garde.
Financial behemoths, they’re able to throw their weight around, hurting both
individual consumers and small businesses with their policies and restrictions.
Recent consolidations prove this point. If you aren’t aware,
PayPal now owns Venmo. With two major payment companies under one roof, small
businesses are at a higher risk of being de-platformed by both if they fall
afoul of one of the services—a situation that often occurs via no fault of the
business.
The use of multiple payment services also raises
embezzlement and other misuse concerns by employees. Yet when money flow can be
more effectively controlled via technology such as AI, small business owners
can concentrate on running their businesses (and get more sleep at night, too).
Pillar 3: Blockchain
Blockchain may be slightly less well known than bitcoin and
other cryptocurrencies. None would be possible without this underlying
technology acting as a ledger for all crypto transactions. Blockchain
innovators are big business—several ETFs focus solely on blockchain developers.
But if blockchain is powering billion-dollar enterprises, what can small
businesses gain from it? The answer is a universe of new customers, suppliers,
and access to capital not found in the traditional financial system.
One simple way small businesses can benefit from blockchain
is the acceptance of cryptocurrencies as payment. When your company can receive
bitcoin and other cryptos, it’s a sign you’re part of the blockchain
revolution—a message younger customers are particularly interested in.
Also, small businesses can gain from smart contracts
existing on the blockchain ledger as self-verifying and self-enforcing
agreements. Such innovation provides small business with a level of protection
typically reserved for large organizations with massive budgets. Last, the
blockchain is fast becoming a major funding and capital source for tomorrow’s
companies interested in scaling instead of impressing a bank manager.
Pillar 4: Digital Wealth Management
Perhaps the highest-tech pillar of fintech, digital wealth
management combines the use of AI, big data, and risk management to provide
financial and investment services to a wide array of customers, including small
businesses. Continuing a theme often repeated in fintech, digital wealth
management is about providing tools, analytics, and deep insights to small
business previously reserved for the big boys. (A company with 30 employees may
not have the resources to hire a financial analyst, but they absolutely have
resources to use software to alleviate financial management burdens.)
From the small business perspective, the sky is the limit
here. Digital wealth management provides owners the ability to manage multiple
payment processes, like providing a warning if a company’s bitcoin wallet holds
a large balance, and the risk of loss is (daily) increasing.
Such systems may also help owners make better choices when
selecting equipment and other supplies by providing information about
depreciation and total cost of ownership. It’s also likely that digital wealth
management systems can become the chief financial officer a small business
could never hope to afford.
How to Unite the Fintech Pillars
All four fintech areas may be enticing to small businesses,
but most current offers on the market remain fragmented. In fact, today’s
situation evokes streaming TV services, whereby myriad companies offer their
specific platform for consumers, who use it to cobble together entertainment
options.
Just as such content overabundance stresses consumers, most
small business owners don’t have the time or interest to compile an effective
fintech package from multiple vendors. Instead, businesses need one vendor that
can help them explore all fintech’s largesse. One such company stands out as
doing just this: an emerging startup from Irvine, Calif., named Finfare.
I sat down with Finfare’s CEO Wayne Lin to learn more about
his company’s approach to fintech for small business. Immediately, I was struck
by how small businesses aren’t an afterthought to Lin—they are his focus. He
explains, “Our vision is to improve and simplify the way small businesses
raise, spend, and manage money. Our platform is as intuitive and user-friendly
as possible so that entrepreneurs with little to no background in finance and
accounting can still benefit from our array of functions with minimal
training.”
Finfare’s approach is to combine services from best-in-class
partners such as Marqeta, Plaid, and Alloy with the team’s in-house expertise
in AI to present small businesses with a single package covering practically
every fintech (and traditional finance) need.
Here’s a practical example. One of the company’s initial
offerings is the Finfare Executive Card, a bank-issued credit card with
advanced digital safeguards such as limiting spending to a specific geographic
area, constraining purchases by type, and controlling online purchases.
Finfare’s companion app also can capture receipt information and even
automatically sort by category. “It’s like bookkeeper you keep in your wallet,”
explains Lin.
Employing AI to not only regulate outside spending, but also
automatically track, categorize, and account for external purchases, it’s
possible to reduce these necessary but time-draining activities—a boon for
small businesses and their owners. As Lin explains, “I’m a proponent of Michael
Gerber’s E-Myth approach to entrepreneurship. Entrepreneurs should be able to
work on their business, not in their business. Every minute we save owners from
expenses and back-office paperwork is critical time they can use to make more
connections, win clients, and build the best business possible.”
Empowering small business owners to flourish with this kind
of alt-tech approach couldn’t be more vital in these difficult times, an era of
unrivaled uncertainty and fear. The truth is this demographic couldn’t be more
important to our economy and really, our way of life. Intrepid entrepreneurs
don’t just create unprecedented jobs and sometimes, unprecedented industries,
they enable the middle class to exist in this country, serving as the bedrock
of our republic.
If we hope to keep the American experiment in democracy
going well into the 21st century and far beyond, we must support the small
businesses constituting our societal backbone. Lin sees this truth as not just
central to his company’s value proposition, but also its raison d’être. “We
don’t want a handful of vast conglomerates at the top of our nation and 95% of
the population with no social mobility,” he says. “That kind of a vast
imbalance is a recipe for disaster. Instead, it’s my hope that fintech
innovations serve as the great equalizer, enabling small business owners to
(re)grow our economy, leading to better lives for all.”
A stirring vision, one that can’t unfold soon enough in
these hard times.
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