How to Choose the Right Fintech for Your Business

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The number of fintech companies has exploded in recent years. In 2021, global investments in fintech have been clocked at $210 billion with 5,684 closed deals. But it’s not just about the total size of the fintech market; we have also seen a significant increase in the number of fintechs – only the United Kingdom registers the presence of 454 fintechs. The same is happening in Asia — 600 fintechs operate in Hong Kong. This development has even been called a digital big bang.

This increase in fintech has been accompanied by an increase in the variety and specificity of fintech offerings. As a general theme, we are seeing a shift beyond consumer-focused products towards business banking services – particularly fintech solutions for small and medium-sized enterprises (SMEs).

Here, I look at the key things an SME should consider when choosing a fintech.

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From neobanks and challengers to neo-niches

“Challenge banks” and “neobanks” were the first generation of fintechs to take on the big banks. Challenger banks went straight for the jugular – offering banking services directly against traditional banks. Neobanks offered similar services to banks, but without a banking license. In both cases, the goal was to provide a service that mirrored a traditional consumer banking experience, but with a more user-friendly interface and offerings. Regulators have moved quickly to adjust their rules to allow challengers and neobanks in jurisdictions around the world, for example through sandboxes or specific virtual banking licenses.

As the fintech market has grown, we have unsurprisingly seen an increase in market segmentation. A new wave of neo-niche fintechs has arrived and is advancing against challengers and neobanks. Neo-niche fintechs cater to select, very specific and underserved target customers.

The focus of a neo-niche fintech is often demographic: it may target its products to minority communities (e.g. Islamic banking), unbanked populations, LGBTQ+ customers, or wealthy individuals (referred to as “wealthtech”) . And this approach is beginning to bear fruit: by addressing a more specific audience, the neo-niches develop loyal and dedicated customers.

Sometimes the niche is not based on demographics, but on the fintech product itself. This is known as vertical bank. Through vertical banking, the fintech can specialize in business lending, currency exchange, payments, or investments.

For companies, the proliferation of fintechs is of course good news. This means that there are more and more bespoke options available to suit their needs. But at the same time, they face the paradox of choice: how to choose a fintech provider when there are so many options available.

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What are the most important factors when choosing a fintech?

Although not exhaustive, here are some of the most important factors to consider when choosing a fintech for your business:

  • Service bundling. You’ll want a fintech solution that can deliver the specific services you’re looking for. For example, if you intend to regularly perform spot transactions in foreign currencies, you will need a fintech that offers this service. While neo-niching means you can probably get a different fintech for each service if you want, it will often make sense to choose the provider that can provide you with most of the services you need in one go.

  • Pricing. Although it is not the only variable to consider, price is still important. Don’t just focus on numbers, consider the company’s transparency on pricing as well. For example, does it require minimum deposit amounts? Does it charge a one-time fee for currency conversions?

  • Customer service. One of the biggest factors that turned consumers away from traditional banks was their shocking customer service. Has the fintech provider you are considering received good reviews online? Does it publish its average response times?

  • Multiple currencies. In our globalized world, it is increasingly common for a business to need to trade in multiple currencies. When a fintech provides a multi-currency wallet, check which currencies are available and what exchange fees they charge.

  • Jurisdiction. Traditional banks often have strict rules regarding the residency of applicants. It is important to verify that a fintech provider is authorized to offer products in your area. Also keep in mind what the consequences might be if you decide to move your business to another country later.

  • Paperwork. The key to fintech’s value proposition has always been to “do everything online”. Check the fintech registration process and if a time estimate is provided. Fintechs should offer a seamless and simple onboarding experience.

  • Security and data protection. Fintechs have custody of some of your most sensitive business assets and data. You should check that they have all the necessary protections and safeguards in place.

As the fintech market has grown, fintech is no longer generic consumer alternatives to old-school banking. There are now fintech solutions for virtually every potential demographic and every specific service a business might need.

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