Can Fintech turn around our collapsing economy?

You don’t have to read many recent articles to know that American companies face a tough road ahead. From out-of-control inflation to supply chain woes, there are few industries that won’t take a hit in 2022. Even the Silicon Valley behemoths are struggling. Seemingly indefatigable Facebook is considering layoffs. Google advises its workers to be “more entrepreneurial”.

If these financial leviathans — raking in billions every month — are about to fall, what hope is there for America’s small businesses?

However, the news is not all bleak. A new wave of companies is combining the best of the financial and technology sectors into a hybrid industry called fintech. Even better, they enable small businesses to not only stay alive, but thrive.

But first, why should do we care about the little guys?

Big business gets more headlines, but small business is the lifeblood of the American economy. As Martin Rowinski wrote for Forbes earlier this year, “No matter how small it starts—one, two, five, 10 employees—within that town, city or county, your small business creates new economies where there once was none.” Similarly, the Small Business Association (SBA) reports that companies with fewer than 500 employees make up 99.9% of all US businesses, which leads to a simple question: Why are both financial institutions and tech outfits making it so difficult for small businesses to succeed ?

These financial difficulties are more than familiar to anyone who has ever started a business. Banks and the like continue at a snail’s pace, but 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 attitude toward small businesses as they seek new revenue streams. Example: Google is now forcing small businesses to pay to use G Suite, which it once provided for free.

In these challenging times, small businesses would do well to seek alternatives to both traditional financial companies and Big Tech machines. The trick? To find correct option. Enter alt-tech. It’s a broad term for a variety of products and services popping up in innovation hubs like Austin, Texas, as well as in basements and garages around the country.

Building on my discussion of alt-tech in previous articles, including the threat of economic de-platforming, how to take back photo sharing from Mark Zuckerberg, and the need to keep AI working for the good of humanity, I set out to find out how such disruptions can benefit small business owners.

The answer is clear.

Companies operating at the finance/technology nexus, an industry known as fintech, is 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 model of surveillance capitalism.

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 have probably heard of Web 3.0, which is based on innovations such as the metaverse. You may not be aware Lending 3.0, a disruption of business as usual, with an emphasis on online services that are not affiliated with traditional banks. Fintech company Marqeta recently published a report on digital lending that shows Americans are more than ready for a lending revolution.

Consider these statistics from Marqeta’s research: 70% of respondents believe the experience of getting a loan is a decades behind Online banking. 80% believe traditional lenders try to hide a loan’s true cost, and more than half say it takes too long to get money after the loan is approved. All of these concerns matter to small business owners. Were you grilled about your personal credit before you got a loan that is essential for your operation? Then you probably think there is a better way.

In its future state, digital lending, powered by efficient fintech platforms, will be able to simplify quickly peer-to-peer lending with full transparency as well as high trust and security. Why deal with a bank when there are better sources of capital with less hassle, reduced costs and ultimately higher trust?

Pillar 2: Payments

Companies that facilitate rewards are perhaps the best-known corner of fintech. Most people have used PayPal, Venmo, or Zelle to place an order online, pay back a friend for lunch, or send money to relatives. These companies have become so mainstream that they are no longer avant-garde. Financial giants, they are able to throw their weight around, hurting both individual consumers and small businesses with their policies and restrictions.

Recent consolidations prove this point. In case you’re not clear, 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 into conflict with one of the services – a situation that often occurs through no fault of the business.

The use of multiple payment services also raises concerns about embezzlement and other abuses by employees. But when cash flow can be controlled more efficiently via technology like AI, small business owners can concentrate on running their business (and get more sleep at night, too).

Pillar 3: Blockchain

Blockchain may be a little 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 exclusively on blockchain developers. But if blockchain powers billion-dollar businesses, what can small businesses gain from it? The answer is a universe of new customers, suppliers and access to capital that cannot be found in the traditional financial system.

One simple way small businesses can benefit from blockchain is the acceptance of cryptocurrencies as payment. When your business can accept bitcoin and other cryptos, it’s a sign that you’re part of the blockchain revolution—a message that younger customers are particularly interested in.

Small businesses can also profit from smart contracts that exist on the blockchain as self-verifying and self-enforcing agreements. Such innovation gives small businesses a level of protection usually reserved for large organizations with huge budgets. Lastly, the blockchain is quickly becoming an important source of funding and capital for tomorrow’s companies interested in scaling rather than impressing a bank manager.

Pillar 4: Digital wealth management

Perhaps the highest technological pillar in fintech, digital wealth management combines the use of AI, big data and risk management to provide financial and investment services to a wide range of clients, including small businesses. To continue a theme that is often repeated in fintech, digital wealth management is about providing tools, analytics and deep insights to small businesses that were previously reserved for the big boys. (A company with 30 employees may not have the resources to hire a financial analyst, but they certainly have the resources to use software to ease financial management burdens.)

From a small business perspective, the sky is the limit here. Digital asset management gives owners the ability to manage multiple payment processes, such as issuing a warning if a company’s bitcoin wallet has a large balance, and the risk of loss increases (daily).

Such systems can also help owners make better choices when selecting equipment and other supplies by providing information on depreciation and total cost of ownership. It’s also likely that digital wealth management systems could become the CFO a small business could never hope to afford.

How to unite the Fintech pillars

All four fintech areas can be tempting for small businesses, but most of the current offerings on the market are still fragmented. In fact, the current situation evokes streaming TV services, where countless companies offer their specific platform to consumers, who use it to intertwine entertainment options.

Just as such an abundance of content stresses out consumers, most small business owners don’t have the time or interest to compile an effective fintech package from multiple vendors. Instead, companies need one provider that can help them explore all fintechs stores. One such company stands out by doing just that: a new startup out of Irvine, California, called Finfare.

I sat down with Finfare CEO Wayne Lin to learn more about the company’s approach to fintech for small businesses. Immediately I was struck by how small businesses are not 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 entrepreneurs with little or no background in finance and accounting can still benefit from our range of features with minimal training.”

Finfare’s approach is to combine the services of 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 that covers virtually all fintech (and traditional finance) needs.

Here is a practical example. One of the company’s first offerings is the Finfare Executive Card, a bank-issued credit card with advanced digital security measures such as limiting spending to a specific geographic area, limiting purchases by type and controlling online purchases. Finfare’s companion app can also capture receipt information and even automatic sort by category. “It’s like a book holder in your wallet,” explains Lin.

By using AI to not only regulate outside spending, but also automatically track, categorize and account for outside purchases, it is possible to reduce these necessary but time-consuming activities – a boon for small businesses and their owners. As Lin explains, “I’m an advocate for Michael Gerbers E-myth approach to entrepreneurship. Contractors must be able to work on their business, not in their business. Every minute we save owners on expenses and back office paperwork is critical time they can use to make more connections, win customers and build the best possible business.”

Empowering small business owners to thrive with this kind of all-tech approach couldn’t be more important in these difficult times, a time of unprecedented uncertainty and fear. The truth is that this demographic could not be more important to our economy and indeed our way of life. Unfinished entrepreneurs not only 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^St century and far beyond, we must support the small businesses that form the backbone of our society. Lin sees this truth as not only central to the company’s value proposition, but also its raison d’être. “We don’t want a handful of big conglomerates at the top of our nation and 95% of the population without social mobility,” he says. “That kind of large imbalance is a recipe for disaster. Instead, it is my hope that fintech innovations act as the great equalizer, enabling small business owners to (re)grow our economy, leading to better lives for all.”

A moving vision, one that cannot unfold quickly enough in these troubled times.