Financial technology – or fintech – is a force to be reckoned with in today’s world. It’s a term used to refer to any application of technology in the financial sector. And when it comes to managing their finances, franchises have lot to gain by embracing the latest tech trends.
Of course, innovation in the financial sphere isn’t new: just consider double-entry bookkeeping, Excel spreadsheets and the introduction of online banking. But in the last few years in particular, fintech has grown exponentially. Leaps in computing power, capacity and availability have truly disrupted the financial world, allowing companies to make saving, selling, spending, investing and lending quicker, easier, and more streamlined. So whether it’s the rise of mobile payments or the emergence of alternative currencies, traditional methods of financial provision are being challenged by tech-based alternatives. It’s no wonder, then, that Britain’s fintech sector is booming and attracting worldwide investment.
Unsurprisingly, traditional business models have been demolished in the wake of fintech’s success. For instance, high-street banks are no longer the only option. Why would somebody pay 5% to 7% in fees to transfer money abroad with their bank when a few quick taps on TransferWise, a money-transfer app, means they can pay just 0.5%?
And investment-management services are no longer just reserved for the wealthy: the Nutmeg app allows even small-scale savers to set goals and invest their cash online accordingly. What’s more, a variety of crowdfunding and peer-to-peer lending platforms are allowing entrepreneurs to get funding quickly from anywhere in the world from people they’ve probably never met. Technology has rewritten the old rules when it comes to the way businesses are funded and, as a result, it’s never been cheaper to set up and develop a company.
There’s currently still a strong place in the market for highly regulated and tightly governed institutions like banks, which still hold the monopoly when it comes to things like current accounts, savings and mortgages. However, while the banks have the advantage of security, tech companies are able to move and adapt to the needs of the market far more quickly. Just as ATMs pushed branch efficiency forward and smartphone banking allows account holders to manage many of their banking requirements themselves, banks will have to find new ways to keep up or join forces with tech startups.
Additionally, legislation will have to move to regulate the industry. The EU introduced a payment institution licence in 2009, allowing many fintech startups to compete in a single digital market, simplifying payments for consumers and business across Europe.
How franchisees can reap the benefits
Franchisors have much to gain from fintech, especially when it comes to monitoring the financial performance of a large network. For example, having all franchisees and their businesses on a common cloud-accounting and -bookkeeping system gives everyone in the network clear visibility. Looking at an easy-to-understand dashboard of data, franchisors are able to track performance and see exactly where any gaps, trends or strengths are. It can be incredibly difficult and time-consuming for a franchisor to look at and analyse each franchisee in isolation and you could end up missing out on some crucial insights.
But by being able to take a bird’s eye view of the whole network and drill down to see more detail or spot patterns, they can understand exactly where they need to intervene. This ensures they’re using their resources in the best possible way and that the right parts of the business are receiving the right assistance.
Fintech can also support franchisees on the front line of customer service. Payment processing software and electronic point-of-sale (EPOS) systems are a major area of fintech development and some exciting startups are coming up with innovative improvements. Take iZettle, which allows small businesses to take card payments through a smartphone or tablet, doing away with the need to invest in expensive hardware. Whether it’s taking payments, tracking stock or producing sales reports, EPOS systems provide a fast and efficient way of dealing with customers and processing sales. Consumers demand ever faster and simpler ways to pay and franchises that invest in the latest point of sale technology stand a better chance of keeping them happy.
A franchisee’s life can also be made a bit easier when it comes to managing their accounts. Quickbooks and Xero are just two of the many cloud accounting systems available that allow businesses to manage their accounts wherever and whenever they are. Meanwhile, bookkeeping platform Receipt Bank links directly to these systems and makes entering data on bills, invoices and receipts less resource-intensive, allowing business owners to get on with their day job.
However, some franchises may find that although they’re inspired by all these fintech solutions, in reality they’re bound by the franchise agreement to use the systems determined by the franchisor. That being said, it’s important to remain aware of opportunities and innovations that can benefit your business and share any ideas you have with your franchisor. After all, thanks to the rise of fintech, innovation in finance isn’t just the domain of the big players.