Financial technology — or FinTech — is an industry that continues to evolve, helping consumers and businesses alike streamline their finances. In the last 10+ years, FinTech solutions have helped eCommerce businesses invest in growth, advance sales, manage business banking, and more.
To help you find the right FinTech solutions for your eCommerce business, we put together the following FinTech guide. It outlines what FinTech is, why it’s helpful, and how you can leverage it to take your online business to the next level.
What is FinTech?
FinTech refers to the products and services that use technology to disrupt traditional financial services. We use FinTech all the time in our daily lives — from online banking and mobile check deposits, to sending money to friends and family via apps like Venmo or Zelle, to being able to purchase just about anything online.
At the end of the day, FinTech companies use technology, software, mobile devices, and/or cloud services to make traditional financial services faster and more flexible. This includes banking, investing, payments, financing, and more.
Traditional financial services involve a lot of manual processes. Before the advent of technology, if you had a check to deposit, you had to bring it to the bank. If you needed to pay someone, you did so via cash or check. If you needed a loan, you went to a bank to fill out an application, provide necessary paperwork, then waited for a decision.
Traditional financial institutions are risk averse by nature with systems specifically designed to keep their customers’ assets safe and their own profits healthy. Many of those systems are still in place today. Let’s take small business financing as an example.
Today, if a small business approached their bank for a business loan, they’d be required to submit reams of paperwork, including bank statements, business financials, tax returns, business plans, proof of ownership, and more. They’d likely have to have a site visit from a bank rep. And they’d have to wait weeks or months to hear if their application is approved or not. Then, if approved, there’s the wait for actual funding. Needless to say, the underwriting process is extremely long and involves a lot of manual work for both the applicant and the bank.
For small businesses, they don’t have weeks or months to wait for a lending decision. For banks, their resources are better spent on applications from larger businesses seeking loans for $1 million or more — not an amount that small businesses seek, which is generally under $250,000. As a result, approval rates for small businesses are low. Especially when those businesses are online or based in eCommerce.
It’s no surprise then that technology-driven solutions have emerged — and continue to emerge — to streamline how businesses (and consumers) get financing and manage other aspects of their finances. In fact, there are so many solutions these days for online sellers alone. Continue to the next section for five of them.
Top FinTech Products for Your eCommerce Store
Now that you see the value in FinTech, how can you actually leverage it for your eCommerce business? Start by looking at these five FinTech solutions for online sellers:
1. Consumer Financing
A more recent FinTech solution is consumer point-of-sale financing through companies like AfterPay, Affirm and Klarna. These offers are embedded into your product listings and made available to customers at checkout, in case they want to buy now, but pay later.
Point-of-sale financing allows customers to get an item when they normally would while also paying for it over a longer period of time. While credit cards offer the same benefit, these consumer financing companies provide a bit more flexibility. For example, there is no hard credit pull and, for some, no interest. What’s more, decisions are made in real-time and, if approved, customers just continue the checkout process as usual.
So what’s the cost to you? If you offer consumer financing, you’ll get paid in full right away for each sale. Similar to credit cards, you’ll have to pay transaction fees, which are generally around 2-5% per transaction.
2. Digital Banking
All traditional banks allow you to manage banking online, deposit checks from your mobile device, and transfer money digitally as needed.
That said, they often come with a lot of fees. This is because traditional banks have a lot of infrastructure (just think about how many bank branches there are across the U.S.) and they need to cover their own costs.
As a result, traditional business bank accounts typically come with annual or monthly maintenance fees, minimum balance requirements and transaction limits that, if not met, result in more fees.
The alternative? Online-only business banks like Rho, which don’t have the same type of infrastructure as banks. As a result, they’re able to offer the same services — online banking, mobile check deposits, digital payments, etc. — with minimal to no fees. What’s more, some even offer high interest on your balance, so you can actually earn money.
3. Instant Advance from Payability
As an eCommerce seller, you likely experience cash flow issues while waiting for your marketplace payouts — which makes investing in growth difficult. Without reliable cash flow, you can’t buy inventory as you need it, launch marketing campaigns, etc. Fortunately, there are FinTech solutions designed to help eCommerce sellers overcome their cash flow issues and finally be able to elevate their business’s growth.
One such solution is Instant Advance from Payability. With Instant Advance, you could get up $250,000 in as fast as 24 hours. It’s not a loan — it’s a discounted purchase of your future receivables — so there’s no credit check involved or compounding interest. Payability looks at your sales history across all the channels you sell on, including Amazon, Walmart, Shopify, Newegg, eBay (managed payments only), and more. You could be approved and get funded within one business day.
Payability also offers daily, real-time marketplace payouts on Amazon, Walmart, Newegg, and more through Instant Access.
Discover how Instant Access can protect you from the repercussions of an Amazon account level reserve.
4. Channel-Specific Financing
Depending on the channel(s) you sell on, you might have access to a channel’s own financing solutions. For example, Amazon Lending and Shopify Capital exist to help top-tier sellers on their respective platforms get financing.
Both of these options are invite-only, so you can only apply if you see an offer in your account. Applications are online and involve minimal to no paperwork, decisions and funding take a matter of days, and repayments are made via auto-deductions from your platform payouts. The decisions themselves are based on your selling history on their respective platform alone.
Here’s a little more about what their offers might actually look like:
- Amazon Lending: If you’re a high volume seller on Amazon, you might get an offer from Amazon Lending for a loan up to $750,000 or a business line of credit from Marcus, with which Amazon Lending recently partnered.
- Shopify Capital: Shopify Capital offers loans and merchant cash advances up to $1 million.
Other FinTech platforms that offer financing include point-of-sale apps like Square and Stripe, which take your sales activity into account when assessing your creditworthiness.
Blcokchain is a newer technology that refers to a special kind of database most commonly used to keep records of transactions, such as a money transfer, a contract, or a shipment.
As a public ledger of sorts, it stores data in blocks that are then chained together in chronological order. The data that gets stored is the “block” that is then “chained” to the block preceding it. All information is time-stamped, permanent, and viewable by anyone, which helps ensure its integrity and transparency.
In eCommerce, blockchain can help you track your supply chain, manage inventory, keep costs down, and more. For example, you could trace a product’s journey from manufacturing, to warehousing, to a customer. To learn more, here is a list of other blockchain benefits for eCommerce sellers.
Review your current business processes to see if anything can be improved with a FinTech provider, be it your sales conversions, business banking, financing options, or record keeping. And don’t forget to check out Payability’s financing solutions, designed specifically for eCommerce sellers like you.