The fintech SME love story is not about to end

The rapid growth of FinTech companies has received a lot of attention. FinTechs are a set of technology companies that offer alternatives to traditional banking services, most often exclusively in an online environment.

The emergence of FinTech platforms is changing the provision of financial services worldwide. But as the FinTech industry continues to grow, new technologies, including distributed ledger technology, cloud computing and artificial intelligence, have begun to enable faster, more convenient and more cost-effective financial services.

As someone who closely follows financial technology trends, I know all too well how the FinTech industry has evolved in recent years. Many FinTech pioneers recognized that innovation is a desperate need. When you put yourself in the shoes of a small business owner, you are better equipped to empathize with their situation and create solutions, which is exactly what FinTech companies are doing, paving the way for SMEs to access better financial services.

For example, access to credit, everyone knows that small and medium enterprises (SMEs) play an important role as a driving force in Uganda, they are an important source of jobs, growth and innovation. But it’s no secret that funding is critical to small business growth, yet SMEs routinely report problems accessing credit.

SMEs are now turning to FinTech platforms for faster access to credit because FinTech platforms have faster processing times and less onerous guarantees.

When it comes to loans, having more flexible options available to certain businesses, especially small businesses, can mean the difference between success and failure. FinTech platforms have the potential to expand the role of invoice financing also known as factoring for SMEs. Factoring is one of the oldest forms of loan. Factoring is particularly attractive for smaller companies that may otherwise lack security to obtain loans or face other liquidity constraints.

These firms can rely on the creditworthiness of larger customers to facilitate borrowing for investment or, more typically, working capital. Factoring also enables SMEs to compensate for their limited expertise and bargaining power when collecting late payments from large customers by outsourcing these activities to a third party.

FinTechs offer digital payments and these bring significant benefits to SMEs as they can reduce transaction and delivery costs for merchants.

Advances in technology such as mobile phones/internet, contactless solutions such as QR codes, big data analysis, APIs and biometric technologies influence the development of digital payments. These innovations have led to the development of new delivery channels and payment methods, which significantly simplify the payment process, aid in customer onboarding and improve the precision of real-time approvals.

Needless to say, all businesses should be able to manage their accounts properly to establish credibility and transparency. Optimal operation cannot be expected if invoices are not delivered quickly. As more small businesses put their trust in FinTech, they get to explore different methods to easily manage their accounts with real-time financial monitoring to ensure everything is in order. This gives business owners peace of mind. Once this is in place, business owners can focus on other aspects to make their small business thrive at the most beneficial pace.

The emergence of new technologies has also enabled non-banking entities to offer financial services to underserved sections of society. These devices have the potential to address barriers faced by SMEs. But that said, SMEs need to improve their financial literacy to make the most of the financial opportunities made possible by FinTechs since they are here to stay.

Hassan Kitenda is an investment analyst.