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CAN FINTECHS POSITIVELY IMPACT THE LAST STANDING GOLIATH OF FINANCIAL SERVICES: CAPITAL MARKETS?

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Mel Tsiaprazis, COO of Nivaura

 

The global financial services sector has over the past ten years or so been naturally transitioning to operational processes facilitated by digitisation, automation and artificial intelligence. We’ve seen this in the personal finance industry worldwide, with digital banks such as Starling Bank and Nubank and international payment services such as TransferWise, MyVoice and Khalti. These fintechs democratised personal finance, enabling a broader group of people access to financial services that were previously overlooked by traditional financial service institutions.

One segment of financial services, Capital Markets, remains the exclusive stronghold of established corporations and their service providers (such as investment banks and major law firms). Due to the high cost of capital acquisition, many small and medium sized businesses are excluded from this form of financial service, despite the fact that it could aid their corporate growth and fuel ideas.

 

Why is the democratisation of Capital Markets important?

Capital Markets have driven hyper growth and underpinned many major developments in products and services we use every day, from telephones and cars to oil and even children’s toys. Imagine the power of extending this capital to SMEs.

Capital Markets democratisation will enable the provision of capital to all organisations, Multinational enterprises, Small Medium Enterprises and New Fund Offers included. Access will drive company growth and fund great ideas that will ultimately improve our world.

To achieve this requires two fundamental changes. First, we must reduce the high cost of capital acquisition, which is driven primarily by inefficient workflows. This is recognised across the end-to-end value chain and infrastructure, in labour intensive processes, high operational costs, and risks and accessibility challenges associated with a lack of real-time data. Second, we need to tackle the lack of accurate credit assessments for SMEs, caused by the highly fragmented financial data on these companies.

History has shown that the human race doesn’t lack ideas. It is the lack of funding of good ideas that hinders growth.

 

Mel Tsiaprazis

Tackling the cost of capital acquisition for SMEs

SMEs typically seek funding of £15,000 to £1,000,000 which becomes costly (and at times counterintuitive) when to access a funding programme could cost£150,000+ in fees. So, do SMEs even need access to Capital Markets?

In the UK, 99.9% of all private sector businesses are SMEs. American Express shared in 2019 that over 30% of SMEs find it difficult to access the finance they need and are turning to new sources of finance. This was especially prevalent in 2020 during COVID-19, where accessing capital to survive and/or grow businesses was challenging to say the least. Many turned to alternative sources such as credit cards and crowdfunding. This is not just a challenge for the western world, but a global issue.

In Africa, according to an LSEG 2020 Report, 40% of SMEs say that accessing capital is the primary factor constraining their growth. This is particularly important, considering that employees of African SMEs make up more than 50% of the workforce. Likewise, in Asia, SMEs make up more than 96% of all businesses, providing two out of three private-sector jobs on the continent. They too have numerous challenges in accessing capital to drive growth.

 

Fintechs to the rescue 

Democratisation of capital markets can be achieved by fintechs tackling the current constraints of old technology and manual processes which are slow, expensive and inefficient. Imagine the impact simplifying access to capital would have in fueling growth and enabling great ideas to finally be delivered on. The impact of COVID-19 only accelerated the need for both the capital markets to be digitised and for SMEs to gain access to capital safely, securely and efficiently.

Many SMEs are eager to use digital solutions that enable them access to more efficient, secure and lower cost liquidity in markets worldwide. The question is which fintechs are up to the challenge of financial inclusions next frontier.

 

Why now?

Democratisation of capital markets was being discussed as far back as the 1970s (and mostly likely even before that!), so why is it only being tackled now? Well, it took a pandemic to shake the capital markets behemoth and to bring this issue to the forefront!

As the pandemic has progressed over the course of the last year, we’ve seen an acceleration in the request for digitisation as well as automation. Capital market participants have shifted from wanting an improved value chain to demanding it. Remote workers demand greater user experience, access to cloud based technologies accessible from various mobile devices and a seamless mechanism to communicate not only within but between organisations, all while meeting regulatory requirements.

By addressing value chain inefficiencies, driving greater levels of frictionless cross-party engagement, automating documentation and related audit/compliance requirements will drive down costs. Increased competition that is agnostic to bank branding will encourage participants to look to new paths for growth. You need only look at the vast SME market internationally.

 

Business

REMOTE WORKING SHOULDN’T MEAN A COMPROMISE IN GOOD ACCOUNTING SOFTWARE

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To be bylined to Simon Kearsley, CEO of bluQube

The increase in remote working has meant that reliable accountancy software has become more important than ever to keep businesses working to their full ability. If your business is still relying on manual, paper-based systems for its accounting needs, now is the time to re-evaluate and modernise its accountancy system.

Simon Kearsley

This may also be true if a business’ existing accountancy software is not up to modern standards and falling behind crucial technological developments. Traditional accountancy systems rely on finite capacity for data and are often inflexible. They can also make accounting more difficult when they are not designed to handle multiple users at a time from different networks and locations. Increasing levels of access needs mean that less-modern systems can become slow and overworked, making it difficult for teams to access and slowing processes down.

Updating accounting systems alongside the progression of software is key to ensuring that a business is performing its best and increasing productivity where possible. If a company is not up to date, they risk falling behind competitors that are turning to automated, cloud-based accounting systems.

 

How to assess if your accounting system is working for you

Below are some integral functions for accountancy software which must be considered.

 

Reliable reporting: It is vital that you are able to access data whenever it is needed. Whilst excel is commonly used for manipulating and reporting on financial data, it puts that data at risk of mistakes and makes confidential information more at risk of comprise. Having reliable means for accessing information and reporting on it reduces the chances of these issues occurring and ensures you’re able to utilise that data for informed decision making.

 

No unnecessary costs or overspending: With reliable access to data comes productivity. As members of a team across a company have instant access to the necessary data, such as budgets and spending reports, it means that there is full transparency of up to the minute costs. This ensures that there is no risk of employees being unaware of the current financial status of the business.

 

Improved performance levels: Implementing efficient cloud-based accounting software will ensure your business performs more efficiently and productively than before. Heavy traffic on databases is easily managed, keeping your system running quickly and saving you time extracting the necessary data.

 

Scalable and adaptable: Modern systems are structured in a way to be adaptable and scalable alongside business growth. As your business grows, the volume of accountancy items your system will need to process will change and the way in which you need to report on that data will also evolve. With the right system in place, you can add additional modules, users or data storage in line with your business needs.

The right cloud-based software reduces the risks of your company being held back by a legacy system that is behind the curve.

 

How cloud-based systems can help businesses with productivity

Growth comes with obstacles, but your accounting system should not add to them. Up to date systems should help with business productivity, ensuring that time and money is spent on the most important things. This reduces the risk of businesses being phased out by higher performing competitors utilising modern, and often cloud powered systems.

Modern, cloud-based software is more flexible than ever before. Modern web-service data links will improve the ease of sharing real-time data across business systems, which in turn allows finance staff to direct their attention away from manual processes and toward more commercial objectives.

These modernised systems can also provide specific employee by employee access to varying data sets and varying areas of the software. Tailored access ensures staff aren’t overwhelmed with information they don’t need, or information you don’t want them to see, enabling them to login and help themselves to real-time figures. This makes it quicker for people to access the data they need and reduces workloads for financial teams who previously had to run and collate endless reports for budget holders and management teams. Highly tailored access to your accounting software is also a safer choice, as only those who really need the information can see it.

Another advantage of an effective, modern accounting system is the ability for data to be updated at any time, from anywhere. Again, this can speed up financial processes and ensures that decisions are always being made with real-time figures. With remote working becoming increasingly common, this is an integral feature that can help with financial efficiency.

In order for your company on to fulfil its potential in terms of efficiency and productivity, it’s essential you have the right software in place to support it. The core finance team in particular will be able to free up time to focus on strategic tasks, and decision makers around the business will have access to financial data like never before.

However, if your accounting system is falling behind in terms of these modern features, they may be holding your business back.

 

What to look for in an accounting software provider

Firstly, if you’re looking for a cloud-based system, find out where your data will actually be housed and what security protocols are in place. Not all cloud systems are created equal, and the level of security your data receives can vary tremendously.

Once you’ve ensured it’s secure, it is good to make a judgement on whether it is utilising the best technology available in the market. This will include secure data handling, as well as having user-friendly interface, making it accessible to users throughout the business, not just your core finance department.

It is also significant that the system is reliable and not underperforming when you need it most. For it to be reliable it needs to also be scalable, as your business grows your cloud system should be able to support it, no matter the size of your business. A great cloud supplier will also be constantly investing in new technology behind the scenes, ensuring your software remains at the forefront of modern tech and leaving you to simply focus on the day job.

Finally, if you feel confident in your choice, it is always good to check current client reviews on how the system has positively affected their company. This will help to figure out the potential cloud journey you may undertake and it’s always reassuring to know you’re in the right hands.

 

Final thoughts

If you want to keep up with digital evolutions, changing your accountancy software to a future-proof solution could be a critical step towards maximising your company’s efficiency and productivity, allowing more time and room for your business to grow.

 

 

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Finance

2021 AND THE FINTECH MARKET BONANZA

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By Mike Rhodes, CEO and Founder of ConsultMyApp

 

The Covid-19 pandemic has caused unprecedented disruption for many businesses, however, the fintech market has remained steadfast in its growth. In fact, 2021 has become the golden age for fintech IPOs. For example, RobinHood Markets Inc debuted with one of the largest recorded listings for a fintech company – valued at $32 billion on July 29th 2021.

With the global fintech market predicted to reach a value of £380 billion by 2030, this boom is showing no signs of slowing.

Whilst the fintech market has become one of the fastest-growing sectors of our economy, established banking institutions now find themselves in hot water. If they are to truly rival new market players like Revolut or Tide, they must innovate their digital offering. Yet, despite their efforts, traditional banks are failing at the in-app experience and still struggling to create true differentiation in an increasingly saturated market. Instead, fintech companies continue to outperform them, providing a ‘one-stop-shop’ for customers’ financial needs.

So, how have fintechs rapidly gained market authority in a typically ‘closed shop’ sector?

The Digital Transition

The past 18-months have triggered a rapid acceleration of the shift online. For example, digital banking has seen a significant increase in uptake, with 73% of British consumers now embracing e-banking offerings.

As lockdown and social distancing restrictions hindered in-person sales and services, customers increasingly turned to fintech’s as a more convenient and efficient way to manage their finances. This digital transition is now set to continue to transform the financial services sector as the world re-evaluates traditional forms of banking and the personal finance revolution continues to gain traction.

Mike Rhodes

Customer Acquisition Strategies

Amid this backdrop, fintech companies have remained at the forefront of consumers’ minds and developed a strong and sustained customer base.

Whilst traditional banks remain focused on marketing campaigns that drive individual downloads, fintechs have set themselves apart with effective user acquisition strategies, centred around a simple onboarding processes. Industry leaders have acknowledged that a more streamlined sign up process makes it easier to acquire new users through paid channels.

As a result, fintechs continue to achieve high levels of uptake by appealing to new users with their account activation and login mechanics which require only the most relevant information. In contrast, traditional banks have failed to acknowledge that onboarding and overloading do not need to go hand in hand. Simplicity is key here and until established banks accept this narrative, new market players will continue to outperform them in the digital space.

Effective App Store Optimization

Another contributor to the success of fintechs lies in their App Store Optimization strategy (ASO) which remains at the forefront of the agenda. In fact, for Tide (https://www.tide.co/),  the UK’s leading business financial platform, ASO and Apple Search Ad (ASA) strategies proved to be crucial in driving new business account signups.

ConsultMyApp worked strategically with Tide to improve all elements of ASO, whilst ensuring it was fully synchronized with their Apple Search Ad campaigns. This resulted in Tide’s organic install volumes rising by 140 per cent over just three months, demonstrating how valuable these tactics can be.

By concentrating on ASO, fintech companies improve traffic from organic searches and increase overall conversation rates to boost the efficacy of their paid channels. In a saturated market, ASO is quite simply a must to ensure a company can compete against the competition and sustain market momentum.

 

Customer Retention Strategies

Fintechs have also acknowledged the value in establishing a comprehensive user retention strategy. These apps prioritise the user experience to remain competitive and retain customers. They ensure that from the very first moment an individual logs into the app, their experience is slick and convenient – and this includes communication pathways. These new market players are extremely self-aware when it comes to their communication strategy – knowing how much communication is too much.

Findings suggest that push notifications can in fact double the 30, 60 and 90-day retention of customers, but they should be handled with caution. If executed poorly, push notifications can become intrusive and force users to abandon the app altogether. Yet, fintechs seem to be getting the balance right – targeting the right people at the right time and with the right information.

Fintech companies are currently leaps and bounds ahead of established banking institutions when it comes to producing personalised content. By utilising in-app and external data, fintechs have been able to adapt and innovate the user experience according to specific preferences and interests. By pairing app and message personalisation with dynamic content, fintechs are able to connect with users propelling them into a different league when it comes to customer engagement.

 

Looking Ahead

The fintech market has accelerated from strength to strength over the past 18 months and, with investment into the market on an upward trajectory, this sector is only set to shatter more records.

Ultimately, traditional institutions cannot afford to ignore the new wave of digital banking that has rapidly gained market authority. Instead, they must embrace the value of investing in ASO and the key marketing strategies needed to build awareness, improve the customer experience and develop a competitive edge, if they are to compete with leading fintechs’ offerings.

 

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