Is FinTech the future for Australian small business?

Small and medium sized enterprises (SMEs) make up about 80 percent of the economic activity globally. This makes small businesses and start-ups crucial to not only the Australian economy, but the global economy as well. More than half of all 2,066,523 Australian small businesses have a loan of some description and only 30% are debt-free.

Since the Global Financial Crisis (GFC) of 2008, lending sources have been more difficult to come by for start-ups, small businesses, and entrepreneurs. Yet, but adapting an agile finance strategy, finance may become much easier for these types of businesses. When applying the agile approach to finance, smaller teams will meet more frequently and will have decision making authority. This benefits the small business as well as the lending institution. Businesses may be approved quicker and the overall complexity of the process will be minimized. By having less people involved in the decision-making process, things will get done faster and there will be more transparency on the final decision. So just how do we get an agile finance for small businesses? By using financial technology, also known as FinTech.

Technology permeates our whole lives, from our personal relationships to our professional ones, and sourcing finance should be no different. FinTech is currently creating a shift when it comes to financial services. In the last couple of years, global investment has tripled to more than US$12 billion when it comes to investing in FinTech. This shows that banks and businesses around the world realize just how important this technology is. Nowadays, we have a world of information at our fingertips and FinTech is making is more accessible for small businesses and start-ups to gain access to the funding they need. It does this by marketplace lending, merchant and e-commerce finance, invoice finance, supply chain finance, and trade finance.

FinTech has many other benefits as well. It allows smaller business access to a broader audience and offers solutions such as money transfers, mobile payments, and trading platforms. These resources will bring customers to start-ups because of the innovative solutions they offer. By offering resources that are not available at other institutions, start-ups now have the advantage with FinTech.

'FinTech is not just about digitising money, it's about monetising data' says the Australian Treasury. Companies now have the means to get real-time data on consumers, which means thousands to millions of new information they never had access to before. By seeing what the consumer is interested in, along with social media, businesses can quickly interpret the needs of consumers and offer new products and services based on those needs.

The online financial sector has grown exponentially since the GFC, with investment in the sector reaching an estimate of US$20 billion in 2015, according to theAustralian Treasury. Australia's financial services sector largely contributes to the Australian economy by contributing about $140 billion GDP last year. 450,00 are employed here making it a major driver of economic growth. This will continue to be an important part of Australia's economy in the future.

The FinTech revolution has been providing SMEs with the opportunity to increase their loan volume. About 33 percent of SMEs thought they could not have gotten funds elsewhere, but FinTech offered them a solution. Furthermore, FinTech brings together those who do take higher risk with lower-risk classes. This is important because traditional banks are not able to make this connection, which is where FinTech fills this gap.

Innovative financial solutions, such as incubators, personal and business finance providers, wealth management providers, crowdfunding platforms and more help smaller companies and start-ups get the funding and cash flow they need to keep their businesses afloat and prosper. They provide them with advice and reassurance. FinTech is the brace to support the backbone of the new Australian economy: start-ups, small businesses, and entrepreneurs.

FinTech is revolutionizing the market when it comes to offering loans and finance to SMEs. It brings together businesses and investors who otherwise may not have met through a traditional bank. Furthermore, FinTech offers a variety of technological solutions when it comes to start-ups in finance. This gives these businesses and edge in a competitive market. Small businesses, start-ups, and entrepreneurs make up much of the Australian and global economy, so it is important to recognize this and offer the funding they need to keep them going.