A new report claims that over half of UK businesses are now using some form of financial technology (fintech) and the upshot is that they are saving £4.6 billion.
The report, published by Market Invoice, is based on a survey of 3,482 businesses throughout the UK and has discovered that 65% of those who took part are using at least one type of fintech product. This new technology is helping their businesses operate more effectively and on average the companies are saving around £5,500 per year.
These results are reflective of a wider trend that has seen an explosion in the number and diversity of fintech companies and products across the globe. After the 2008 financial crisis, new and alternative models for financial services were ushered in to a world that had previously been, to all intents and purposes, impenetrable – the traditional banking and financial services.
As the new fintech model started to become established, a broad range of innovative financial products began to emerge and to become available to businesses and the general public. They include:
- Software development (for existing financial institutions and banks)
- Online trading platforms
- Payment systems
- Invoice and property financing
The potential and innovation that these new services offer has proved to be disruptive for the traditional financial services institutions, who are under pressure to cut costs and at the same time modernise. It didn’t take long, however, for them to see a way of turning this disruption into something that could help them move forward – partnerships.
Currently, traditional banking, investment companies and other financial service providers are forging partnerships with fintech companies in a bid to benefit from there technical expertise. This is happening, not just in the UK, but all around the world. One such firm is the investment giant JP Morgan, who invested around $600 million into fintech in 2016 and who have recently entered into partnership with high frequency trading firm Virtu.
When speaking about emerging technology and fintech companies, JP Morgan CEO Daniel Pinto said, “You cannot afford to not have the best technology in the organization – In my view, that is a mix of your internal resources and partnerships, either with vendors or with companies that you’re going to partner with to deliver a product.”
Partnerships such as these will have two main outcomes. First, they will allow the institutions to start operating within the fintech arena. Second, it will give the new fintech companies access to a much bigger customer base – if for no other reason than the endorsement that comes from working alongside a large financial institution – kudos indeed.
So, the changing face of business finance, it would appear, has two main advantages. The first advantage is that companies across the UK now have access to a wide range of new financial products that may be able to help them innovate and progress.
The second advantage is that there is a thriving community of fintech companies who are pushing the boundaries of what can be achieved in the world of finance, via the use of new technology – while also challenging the old guard by pushing them into the 21st century.