WhiteSight

The Unbundling of Finance for SMEs : A Fintech Revolution

Table of Contents

In the ever-evolving world of finance, fintech has emerged as a game-changer, particularly for small and medium enterprises (SMEs).

As a follow-up to our previous article, we delve deeper into how Fintech is unbundling finance for SMEs, offering a plethora of services that were once the sole domain of traditional banks.

We’ve incorporated a section on Cash Management, spotlighting key players that are empowering SMEs to leverage high-interest rates and gain access to instant credit lines. Furthermore, we’ve emphasized crucial sub-categories within the tech platforms segment, including data infrastructure and embedded finance platforms. These platforms are serving a crucial role in facilitating SMEs’ access to contextual financial products through their frequently used channels and at significantly improved rates.

The Fintech Advantage for SMEs

Fintech companies are offering a range of financial services to SMEs, from payments and banking to financing and insurance. They are also providing value-added services such as accounting, taxation, human resources management (HRM), and e-commerce operations. This unbundling of services is enabling SMEs to choose the best solutions for their specific needs rather than relying on a one-size-fits-all approach from traditional banks.

The Unbundling of Finance for SMEs : A Fintech Revolution
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Cash Management Platforms

One of the key areas where fintechs are making a significant impact is cash management. They are offering features such as cash forecasting, treasury management, and liquidity management, which are critical for SMEs in the current macroeconomic situation where banks are offering high-interest rates.

Companies like AgiCap, Treasure, Friday Finance, Monit, Finqware, Puls, and Trovata are providing these services, helping SMEs to manage their finances more effectively and make informed decisions.

Tech Infrastructure Platforms

Fintechs are also providing tech infrastructure platforms that enable SMEs to take advantage of megatrends such as open finance and embedded finance. These platforms are classified into three categories:

    1. Open Finance Infrastructure: Companies like Codat, Railz, and Boss Insights enable data sharing from the back-office systems of SMEs (such as accounting, e-commerce, payroll, etc.) with financial service providers. This enables SMEs to get better access to financial products and at better terms.

    2. Embedded Finance Platforms: There are several firms such as Youlend, Liberis, and Trade Ledger who are partnering with financial institutions and SME business platforms to enable access to embedded financial products for SMEs in the form of a line of credit, embedded banking and card services, and embedded payments. For a deeper understanding of how payment giants are unlocking embedded finance for SMEs, refer to our blog on Adyen’s embedded finance playbook.

    3. Middleware Tech Capabilities: This category includes players who offer modern technology capabilities – such as API-first middle office tech and modern payment capabilities to financial service providers to enable them to serve the SMEs better.

SMEs are hot in the fintech winter

Amidst what some are calling a ‘fintech winter’, SMEs are emerging as a beacon of opportunity. Fintechs are not only helping SMEs manage their finances more effectively and access a wider range of financial products, but they are also carving out a unique and profitable niche for themselves.

SMEs present a unique set of challenges that, when addressed effectively, can unlock massive revenue opportunities. This is particularly crucial in the current climate, where the path to profitability is of utmost importance for fintechs, and venture capital funding has become increasingly scarce. By focusing on the SME sector, fintechs can help themselves in a significant way, turning the challenges of the ‘fintech winter’ into opportunities for growth and success.

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Authors

Founder & CEO | sanjeev@whitesight.net

Sanjeev is a fintech aficionado who loves to explore the depths of the industry as much as he loves to explore the depths of the ocean in his scuba gear. He is the founder and CEO at WhiteSight, bringing a wealth of research and advisory experience to the fintech world.

Co-founder & COO | afshan@whitesight.net

Afshan, the co-founder and COO at WhiteSight, loves studying business models and understanding how things work. When she's not busy working, you can catch her experimenting with new recipes and flavours in her kitchen.

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