30/04/2020

The rise of fintechs in the world of international payments


If the fintech industry had a manifesto it would read something like this: fundamentally address the outdated financial services available to small and medium-sized enterprises (SMEs), by providing access to technology and innovation that supersedes the traditional methods used by incumbent banks. And it appears that this mission is very much on track.

The sector is booming in the UK, as established players and a rapidly growing band of forward-thinking start-ups attempt to disrupt the financial services space. The stats that demonstrate this are compelling:

  • UK Fintech firms raised £4.1bn in 2019 – 7.5 times the amount raised by French fintechs and three times as much as German fintechs.
  • Fintech remained the UK’s largest tech investment sector last year, following a 100% rise from 2018’s total of £2bn.
  • 44% of Europe’s fintech unicorns (companies worth more than $1 billion) and companies valued between $250m and $800m are based in the UK.

And the future looks bright for the sector as well:

  • The Fintech market is set to grow at a CAGR (Compound Annual Growth Rate) of 13.2% by 2024.

This is all great news for SMEs; many of which already rely on fintech’s innovative solutions to manage their financial requirements more efficiently – from securing working capital and managing cash flow to hedging foreign exchange risk.

Coping with Covid-19

The lockdown restrictions that have been forced on society to control the rapid spread of Covid-19 have fundamentally changed the way SMEs interact with their banks, service providers, customers and even their staff. Thankfully, fintechs are built to operate effectively in today’s fast-moving digital-first economy. This innate agility ensures they are well-placed to meet SMEs changing financial demands.

As businesses attempt to rapidly adjust to largescale remote working and service delivery arrangements, access to robust, resilient and flexible technology infrastructures is required to support these often-unfamiliar practices. Unfortunately, traditional banks are typically rigid in their approach to financial technology, depriving them of the flexibility required to adapt quickly and effectively to the changing operational landscape.

In contrast, fintechs are designed to be responsive, adaptable and scalable in the face of adversity. According to the Ernst & Young Global FinTech Adoption Index 2019, the top drivers for SMEs adopting fintech solutions over an incumbent financial institution are:

  • Range of functionality and features (66%)
  • Round-the-clock availability of service (55%)
  • Ease in setting up, configuring and using the service (54%)
  • Rates and fees (39%)

International payments

Long underserved by traditional financial providers when it comes to planning and executing international payments, SMEs that operate across borders crave the agility and innovation fintechs offer at the best of times – a requirement that has become increasingly important during these challenging times.

The fallout from the Covid-19 pandemic has brought the need to make efficient and cost-effective online payments into sharp focus for SMEs. For example, the perennial issue of cash flow for businesses that fall into this category has been perpetuated by the draconian lockdown measures. By leveraging fintechs smarter FX-led solutions, SMEs with international payment requirements can maintain the movement of money throughout this period.

The ultimate goal of any fintech that operates in the international payment space is two-fold: make it quick and easy for users to make peer-to-peer transfers and reduce the cost of doing so. To achieve this, they strive to deliver efficient and intuitive technology, provide access to competitive exchange rates and limit additional fees. Meanwhile, the banks diverse offering means their resources aren’t completely focused on helping SMEs to obtain the best possible exchange rate or ensuring their funds are sent as quickly as possible.

RationalFX

At RationalFX we have developed a technology-led approach to managing international payments that’s underpinned by a forward-thinking culture. Having worked collaboratively with you to understand the risks you face and build a currency strategy that’s bespoke to your business, it’s time for the tech to do its thing.

We will facilitate the secure management of your business’s international payments 24/7 via your free-to-open online account and by developing foreign exchange strategies to help you navigate volatile currency markets. Get in contact today to learn how we can work with you and your business, or setup your free-to-open online account.

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Why choose RationalFX?

Based in the heart of London’s financial district Canary Wharf, RationalFX has traded over $10billion in currencies across the globe. Take advantage of our competitive exchange rates, market expertise, suite of FX products and online payment platform when you make bank to bank transfers in over 50 currencies worldwide.

Whatever your reason for making overseas payments, we’re confident our currency specialists can save you time and money while providing peace of mind. Call our team now on: +44 20 7220 8181