“Huge.” “Surging.” “Very hot.”
Those were just a couple of the terms financial news outlets used to describe the fintech market in 2020. They weren’t just buzzwords. Fintech has seen double-digit growth in transaction numbers and volumes during the pandemic, according to a study that included the World Bank. And digital banking surged during Covid-19, reported American Banker, with 35% of consumers using online banking services more.
It’s no surprise why. During the global Covid-19 pandemic, with many offices closed and employees working remotely, some businesses have found they needed to develop new ways of working in just weeks—or even days. A major beneficiary of this sudden corporate innovation turned out to be the fintech industry, since companies had to implement their digital tools to meet the demands of a stay-at-home world.
But Covid-19 didn’t just accelerate the growth and adoption of fintech. As businesses explored fintech’s potential, they found even more uses for it—uses that disrupted traditional business practices. Some finance and accounting teams also discovered that fintech tools could help cut costs and streamline operations, delivering significant productivity improvements. Here’s how.
Simplifying Complex Processes
One effect of the pandemic is that corporations have been less productive, according to Bain & Company. And one way for finance teams to create efficiencies is through spend reconciliation—an area where innovation has been slow. In many companies, spend reconciliation and payment authorization is still highly labor-intensive, absorbing considerable amounts of accounting time.
But fintech tools can automate much of these processes, such as the three-way matching necessary to approve incoming invoices from suppliers, as well as the more complex and highly fragmented area of travel and expense spend, with its proliferation of employees’ receipts for miscellaneous goods and services.
Fintech tools can also help provide greater visibility into what employees are spending, delivering control, real-time flagging of out-of-policy expenditures, and automated analytics. And tools that automatically link expenditure to individual employees and functions can greatly simplify and speed up time-consuming manual budget allocations.
The upsides don’t end there. During the pandemic, some financial services organizations have invested heavily in artificial intelligence (AI) and natural-language processing to streamline their business even more. Chat AI that interprets customers’ questions and requests can help make companies’ financial professionals more efficient by automating tasks that involve answering basic questions about invoice payments and expense processing.
The Perfect Storm for Fraud
Organizations lose 5% of their revenue every year due to fraud, according to a survey from the Association of Certified Fraud Examiners (ACFE). The typical fraud case causes a loss of $8,300 per month and lasts a full 14 months before detection. And lack of internal controls contributed to nearly one-third of all fraud cases.
Unfortunately, fraud proliferates during recessions and times of economic instability. And the pandemic is a “perfect storm for fraud,” says Bruce Dorris, the ACFE’s president and chief executive.
Here’s where fintech comes in. The AI and machine learning (ML) algorithms in fintech software are designed to understand the normal patterns of your company’s finances over time and then flag anything new or unusual for review. While a traditional, rule-based approach can root out some fraud, it doesn’t offer the same level of sophistication as AI/ML. These tools can search and compare data over time to find questionable correlations or other anomalies.
The Challenges…and Rewards
Integrating fintech innovations into your business technology infrastructure may involve challenges such as data feeds to connect, processes to design, workflows to alter, and trainings to conduct. But fintech generally takes much less time to implement than the multi-year marathons familiar to those with experience in large Enterprise Resource Planning (ERP) implementations.
Another challenge is more abstract. Adopting fintech requires adopting new ways of working—a distinct break from traditional ways of processing payments, and a different way of setting and monitoring financial policies. Instead of paper forms and familiar ERP and purchase-to-pay screens, fintech adoption requires learning and engaging with new and different digital systems.
These new processes may be leaner and more efficient, but they require employees and managers to change old habits and think in a different way. Having organizational change-management skills is imperative.
The payoff, though, can be transformational. The same advantages the financial-services sector has already gained from adopting fintech tools may help streamline your organization’s finance practices as well. It’s just one of the benefits that comes from partnering with a trusted fintech provider.
Learn how the TripActions Liquid™ platform can streamline your company’s financial operations with innovative technology solutions.