Fintech is revolutionising the small business sector
A new FSB podcast, Fintech, Failure and Small Firms, dropping on 21 November, features an in-depth interview with Karen Mills, the leading authority on the economic health and wellbeing of the US’s small businesses, former member of president Obama’s cabinet and senior fellow at Harvard Business School.
In the interview, Mills examines how fintech has been, and continues to be, a game-changer for small businesses, on both sides of the Atlantic. She also charts how fintech platforms were key to economic resilience during the Covid-19 pandemic in the US, creating a V-shaped recovery, rather than slow and painful U-shaped economic recovery as from the 2009 crisis, as fintechs were used to help reach sole traders.
Karen Mills says: “Capital is critical to small businesses, but the process of getting capital is filled with frictions. You know, you ‘Xerox’ a bunch of tax returns and you take them down the street to the bank, and the bank looks at them for three weeks, or three months, and then they say ‘yes’, or they say ‘no’ and you go to the next bank.
“That has been the traditional lending process for decades, maybe centuries. What we have now is digitisation and transformation by technology – fintech. It has been exploding over the past 10 years but is really ready to accelerate now.”
Mills explains how fintech can take data through data pipes, application programming interfaces (APIs), and put them into an artificial intelligence algorithm to tell a lender who is creditworthy. But the best part, she says, is that the small business owner can also know about their cashflows:
“They can see insights into their own business maybe they never saw before. And this has the power to perhaps avoid cash crunches. In my book, I describe something called ‘Small Business Utopia’. And that’s a small business owner able to look at a dashboard that says to him or her: in three weeks you’re going to need $7,000 to buy new inventory. And don’t worry, we know you can pay that back after the holiday season. And here is a button where you are pre-approved, so press here and the money can be in your account today or tomorrow. It is revolutionary. Small businesses depend on cashflow,” says Mills.
Despite this fintech revolution, in the UK, many small firms are not benefiting. In 2022, two thirds of small firms (66%) told FSB they planned to make some form of investment in their business by 2024, but under half (49%) felt they were fully aware of the different types of financing options available to them.
FSB national chair Martin McTague said “Small businesses that can’t access finance are cut off from opportunities to grow; it’s that simple. In the UK, we need to champion the fintech movement. It’s a game-changer. I’m really proud that we offer our members, at FSB, access to a funding platform which includes fintech options, alongside other types of funding.”
Fintech, Failure and Small Firms, a podcast from FSB is available to watch and listen to on:
YouTube: https://youtu.be/aq3e-Vt8Wu8?si=fynXNEc9LtVOYsDt
SoundCloud: https://soundcloud.com/user-214500531/the-fsb-podcast-fintech-failure-and-small-firms-featuring-karen-mills
