When we talk about finance, in general terms, we refer to topics such as cash flow optimization, cash, financing, investments, collections, the balance of payments, liquidity, among others that have been emerging with the entry of new technologies into the business world, which has provided various tools for financial management.
Although these are still important issues today, from a financial management point of view, especially in the case of new start-up models, attention seems to be focused on other aspects beyond the traditional questions: what is the best option for investment, is this investment profitable, do we have liquidity, are we financially sound? Do we have liquidity? Are we economically sound? The question now is: do we have the financial technology we need?
What are start-ups
Start-ups are an emerging form of business organization, which can experience rapid and robust growth. They introduce an innovation, usually based on software or NICT development and application; However, the latter is not an indispensable condition; most business organizations that we call start-ups are related to the IT part.
Many of these large companies and corporations, whose names we associate with new technologies, were born in a certain way as start-ups: Facebook, Google, Instagram, Microsoft itself. What do they have in common with each other and with other start-ups? Let’s look at their characteristics:
– They are totally innovative; they create a new formula for doing something, even something that didn’t exist.
– They start with a team of workers who are also their own bosses; in other words, their organization chart is entirely horizontal.
– The initial investment is minimal and is usually made by the workers themselves, the owners of the idea.
– Operating costs are low; it is not uncommon for them to start in a garage. In some cases, the workers are not even physically together: each can work remotely.
– They use ICTs intensively and depend on them.
– Its success is based on the discovery and exploitation of a niche market with great potential.
Start-ups and finance
According to what we have seen, a start-up is obviously not the typical company that we start with an initial investment, subscribing a capital, defining the value of the shares, or participation quotas. Here it is usually the other way around.
Similarly, start-up success is not measured financially but in potential and impact (e.g., active users). However, start-ups are only a phase: many (an estimated 80-90%) die out; those that survive become another kind of organization, which is when they find external funding, the so-called business angels.
Finance + Technology = Fintech
In this highly technological context, start-ups don’t live by social networks alone. They also live in finance. In a broad sense, the term fintech encompasses all activities in which new technologies are applied to financial and investment activities, whatever the area. Fintech, in short, encompasses new applications for finance, process consulting, new financial products, and new business models in financial services, all made available to users or companies through the Internet.
Generally, start-ups, made up of professionals with expertise in finance and new technologies, offer these financial technology tools, which can be both products and services, providing help about money management or offering investment opportunities. In this way, fintech offers some tools already provided by traditional banks in their online platforms, but not others; in this sense, they are opening new horizons and alternatives.
What fintech companies offer
The products, services, and tools provided by fintech cover different branches of financial activity. Among these, we can mention:
– Financing for start-ups and SMEs.
– Personal and business loans.
– Intercompany loans.
– Investment advisory services.
– Investment platform (as a stock exchange)
– Pension, retirement, and student savings funds.
– Community banking.
– Transfers of funds.
– Payments and collections through electronic banking.
– Foreign exchange.
– Remittance of remittances.
– Virtual currencies, buying, selling, consulting.
– Microcredits for the acquisition of a computer, video, and telephone equipment…
– Personal finance advisory services.
– Financial analysis platform.
– Real estate investment advisory and analysis.
– Comparators lending.
– Crowdlending: project financing through investment groups.
– Crowdfunding (micro-patronage): funding network for financial donations in an altruistic way, with tax exemption possibilities for donors. – It mainly finances artistic projects (works, films) and projects of social interest (schools, shelters) and sports.
– Equity financing for companies.
– Direct Debit Payments
– Payment Platforms
– Neobanks and Challenger Banks
Because of all the possibilities they offer, adapted to the needs of each user and company, fintech is the financial technology of the future, but already available today.