Digital innovation has led merchants to become more efficient in the payment experience for their customers. Through advanced technological systems that streamline the processes of billing and money collection provided through FinTech, businesses have become more competitive and have achieved a higher volume of customers. Jason Simon, who has worked closely with FinTechs for years, explains how businesses can take advantage of them to cut banking costs.
“Reduced bank paperwork, speedy confirmation of approvals and payments, ease of implementation, and affordability for a wider group of users are some of the advantages that FinTechs offer to the market,” Simon explains.
However, transparency in the operation of some of these entities, which starts by charging the user a fair price, is perhaps one of the most important points to ensure the best customer experience and a higher return for businesses that decide to offer their services.
One of the obstacles to banking penetration in different countries is the high value of commissions. According to figures from Fenalco in Colombia, the rate charged for dataphone payments is 4.2%. Although there has been a decrease in recent years, these commissions vary depending on the size of the business, increasing by up to 10%.
In other countries such as Spain, this charge is only 0.8%, demonstrating the high banking costs of a market like Colombia. Jorge Rodríguez, director of MasterCard Advisors for Latin America and the Caribbean, says that only 10% of purchases in the country are made with cards. This is due to the obstacles related to the costs that businesses have to implement this means of payment.
On the other hand, charges for the use of tools such as the dataphone are not the only costs that businesses must assume. Many times, businesses that decide to implement financing must assume high costs associated with the payment method.
“FinTechs are also a key ally in reducing these operational costs related to portfolio recovery and collections,” says Simon. “The goal of FinTechs is to streamline business financing operations through technology-based platforms, taking ground away from traditional financing and fund management formulas.”
As FinTechs make existing borrowing-lending mechanisms more efficient, it is no longer necessary, for many companies, to have an entire portfolio team to manage the payment of financed purchases. The external financing provided to customers through FinTechs ensures that these entities are the ones in charge of collections, taking this burden off the merchants.
Regarding this collection point, one of the services that stand out from FinTechs and that is related to financing are digital wallets. These are useful to reduce costs and simplify existing processes, generating lower costs than traditional banking systems. In addition, the processes are faster and more automated, which improves the efficiency of payments for businesses.
According to the Superintendency of Finance, the portfolio related to consumer credit and loans for the purchase of goods and services grew by 11.54%. They reached $155.4 trillion at the end of last year. These figures show the great acceptance of credit by consumers. At the same time, it is a relief for companies to leave the financing and collection tasks to a FinTech since they use their own non-traditional methodologies to analyze the applicant’s credit risk and establish the interest rates of the loans.
“Consumer financing, performed by an expert third party such as a FinTech, is a strategy for retailers to more easily close their sales by offering their customers the possibility of paying for their purchases in installments and with lower interest rates,” suggests Simon.
Some FinTechs offer their customers really low-interest rates compared to other means of payment. They are laxer in granting the loan, with no handling fees or hidden costs, and allow them to make early payments on their credit at any time or cancel it in full, without any penalty or additional charge.
The financial and technological innovation of FinTechs brings payment solutions that offer a simpler, faster, and safer experience for consumers, directly at the point of sale or through eCommerce. Similarly, for merchants, it has economic advantages, savings in operating costs, and bank payments, but also competitive advantages, with agile and attractive payment methods for their customers.