FinTech corporations are found in every corner of the world and in every niche. (For a helpful overview of FinTech and financial technologies, visit our first article in this series: What Is FinTech?)
Companies are using technology to make financial transactions faster, cheaper, easier and farther reaching. But, FinTech is not without its downsides. There are a few things that every business owner should know before becoming a FinTech company.
FinTech is a new method of making financial transactions using technology and the internet. Avoiding traditional banks and banking fees sounds like a great idea right? It is! However, because there are no regulations in place, financial transactions carry more risk than they would if they were being conducted by a bank. The internet can virtually swallow these transactions without a trace and business owners need to be aware of the possibility of this happening.
Have a BackUp Plan
Businesses should not be entirely dependent on FinTech when it comes to monetary transactions. Technology can, and does fail on occasion, and business owners should be prepared for this occurrence. A backup plan, including handling financial transactions with traditional methods and backing up all files daily, is sound planning.
FinTech doesn’t allow businesses to physically build trust with and for their clients. The internet does a great job of helping businesses to generate new clients and to keep contact and communication with current clients. However, the internet also does a great job of keeping people’s true identities hidden, making it difficult to trust potential borrowers at first. Although it saves time and money, FinTech can create a world of problems when borrowers turn out to be criminals or hackers.
Do The Due Diligence
Businesses can find some protection from these tricky transactions through due diligence. By doing research on potential borrowers and looking for red flags, you can avoid providing funding to businesses with a bad track record. Due diligence can help you spot fraudulent businesses as well, which in turn, protects the end consumer. This phase of the lending process should be set in stone and it should be practiced through the life of the business.
FinTech does make financial transactions easier, faster and cheaper for both parties, but it carries with it some serious implications. Business owners should make themselves aware of these threats, and stay up-to-date with the latest security measures constantly. By having a backup plan, knowing your options, and protecting your business, you can pave the road for success.