SMEs shunning banks for FinTechs

When it comes to payments services, small and mid-sized enterprises (SMEs) are thinking beyond banks and adopting services from financial technology (FinTech) firms, Ernst & Young (EY) finds. 

In fact, more than one-quarter of SMEs have used at least one FinTech for banking and payments, financial management, financing or insurance over the past six months, Ernst & Young reports.  Twenty-three percent of SMEs in the United States have adopted solutions from a FinTech.
That’s according to a survey of more than 1,000 SMEs in five countries. 

And EY sees no let-up in FinTech adoption in sight.  The global adoption rate of FinTech services among SMEs could surge from 25 percent to 64 percent over the next few years, EY predicts. 

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4 reasons to choose a FinTech over a bank

What’s driving the adoption of FinTech services among SMEs?   

Like banks, FinTechs provide compelling electronic payments services.  

But FinTechs stand apart from banks in four important ways:

  1. Best-in-class supplier onboarding: The supplier onboarding services they offer is far more extensive, including supplier analysis and review, development of a supplier transition plan, ongoing supplier outreach and enrollment, and supplier electronic payments support.  These services are a big reason that FinTech clients achieve supplier adoption rates that far surpass bank averages. Most banks target a small fraction of an SME’s supplier base, conduct one-time supplier enrollment, and rely heavily on third parties to contact and enroll suppliers.

     

  2. No bank commitments: The electronic payments services offered by FinTechs are bank agnostic.  This means that SMEs are free to establish and/or maintain depository accounts with any bank, without hidden fees or onerous contract commitments.  Businesses also have the flexibility to choose which depository account or accounts that they use to fund payments to suppliers or how they facilitate dynamic discounting and supply chain financing programs.

     

  3. Business solutions enabled by advanced technology: Delivering innovative technology-driven solutions is what Financial Technology Companies do best.  Banks provide depository accounts. By partnering with a FinTech, a business can count on a user-friendly design that drives supplier adoption; an easy deployment that accelerates time-to-revenue and mitigates risk; a flexible platform that incorporates emerging technologies; and seamless integration with any legacy ERP for streamlined processing and 360-degree visibility into outbound cash flows.

     

  4. End-to-end automation: FinTechs offer an end-to-end approach to accounts payable automation that combines invoice processing and electronic payments.  This approach delivers maximum payback, ensures visibility and control across the invoice lifecycle, and opens the door to more early payment discount opportunities.  Most banks only offer electronic payments. Some rely on old invoice processing systems or lean on third parties to process invoices on behalf of their clients. Regardless, the approach is inefficient.  

SMEs are especially interested in joining FinTech ecosystems that integrate different financial propositions offered by challengers, incumbent providers and, in some cases, nonfinancial services companies.  These ecosystems make financial services more accessible to SMEs, while enhancing the user experience. 

Despite the strong growth of FinTechs among SMEs, the adoption rate among consumers is growing even faster.  Nearly two-thirds (64 percent) of global consumers use services from a Fintech and 96 percent of global consumers are aware of at least one money transfer or payment FinTech service. 

The message is clear: FinTechs have evolved beyond fringe disrupters into sophisticated competitors to banks.  See for yourself how your organization can benefit from partnering with a FinTech.

Contact ACOM Solutions to arrange a no-obligation consultation with one of our payment experts.       

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