Fintech is huge, and it’s only getting bigger.
According to Deloitte’s 2020 fintech report, it’s poised to reach $174 billion in 2023, and investment in the industry has more than tripled since 2015. More people are partaking in digital banking, investing and lending than ever before — even traditional financial institutions are partnering with fintech companies to expand their platforms into the digital space.
To excel in such a large industry, companies need to have their fingers on its pulse and recognize what trends will shape the industry in the near future. Built In Colorado sat down with leaders from fintech companies Funding Circle and Melio, both of whom are doing just that. Managing Director Steve Allocca and Chief Business Officer Prashant Gandhi weighed in on what evolutions are worth monitoring in 2023 and how their companies are capitalizing on them.
Funding Circle aids small businesses in getting the financing they need to start up, grow and drive the local economy. The company’s relationship with traditional financial institutions allows both sides of the arrangement to increase their reach and capability.
Fintech is an industry ripe with opportunities for innovation. What's a new trend or evolution in the industry that you're keeping a close eye on?
The growing collaboration between fintech companies and traditional financial institutions.
This trend is driven by the recognition that fintechs and banks have complementary strengths, with fintechs such as Funding Circle excelling at innovation and agility and banks having established customer bases and capital to invest. By partnering, fintechs can leverage the resources and expertise of banks to scale their operations and expand their reach, while banks can benefit from fintech’s innovative technologies and digital capabilities.
Examples of this trend include partnerships between fintechs and banks to offer online lending platforms, co-branded credit cards and other financial products. Banks also invest in fintech companies to gain access to new technologies and capabilities, and to stay ahead of the curve in terms of innovation. In this way, fintechs and banks can work together to improve access to capital for small businesses and provide more convenient, efficient and transparent financial services.
What impact will this trend have on the industry as a whole, or on Funding Circle and the work your team is doing?
Funding Circle launched our own lending-as-a-service for financial institutions. By partnering with traditional financial institutions such as banks, credit unions and community development financial institutions, we enable our partners to provide affordable, fast financing to small businesses through our end-to-end digital platform. This allows small businesses to access capital more easily and efficiently, while also providing financial institutions with a low-cost, immediate way to generate revenue.
Fintechs and banks can work together to improve access to capital for small businesses and provide more convenient, efficient and transparent financial services.”
What's a project you worked on recently that really embodies your vision for the future of fintech?
The Philadelphia Federal Reserve and Bank for International Settlements recently released a study concluding Funding Circle is “increasing access to capital at a lower cost for borrowers who are less likely to receive credit from traditional banks” and “predicting future loan performance more accurately than the conventional method to credit scoring, leading to better loan performance.”
Melio’s B2B payments platform strives to improve efficiency and clarity in business transactions. For Gandhi, the future is in embedded finance — something that is “literally embedded” into Melio’s business model.
What's a new trend or evolution in the fintech industry that you're keeping a close eye on?
Embedded finance is the next revolution in payments, and B2B payments in particular. The days of small businesses relying on a conventional bank for all of their financial needs are over. Increasingly, software companies are partnering with banks and technology providers to embed multiple financial products into the same user interface.
With cash flow and workflow issues continuing to be a main area of concern for small businesses — particularly those without in-house accountants — small businesses are increasingly demanding more simplified financial systems that allow them to save time and money. Embedded finance is already the status quo in the B2C market, with brands like Apple, Square and Uber enabling customers to make purchases and store funds seamlessly, and now small businesses are asking platforms to meet their businesses’ accounts payable and receivable needs with the same breakthrough technology.
What impact will this trend have on the industry as a whole, or on Melio and the work your team is doing?
Embedded finance is literally embedded into everything we do at Melio. Our team is developing payments infrastructure designed to be embedded into small business users’ most popular and trusted financial products. Rather than focusing only on Melio’s standalone platform, we’re committed to building payments technology that can be integrated with leading financial institutions, software providers and marketplaces.
The days of small businesses relying on a conventional bank for all of their financial needs are over.”
What's a project you worked on recently that really embodies your vision for the future of fintech?
Last year, Melio launched a fully integrated accounts payable solution with Capital One Business, which is just one example of how Melio is embracing embedded finance as the future of B2B payments.
This strategic partnership enables Capital One small business cardholders to pay their vendors and suppliers with a credit card directly from their Capital One Business account — even if the vendors or suppliers don’t accept credit cards. Through this partnership, Capital One’s small business customers can avoid using time-consuming, costly and antiquated payment methods and instead earn rewards and cash-back on purchases.
We are excited to continue exploring strategic partnerships that provide small businesses with more flexibility and control over their finances.
