Fintech: Liberating Capital for SMES, Efficiently

TODAY’S EVOLUTION IN SUSTAINABLE INVESTING OF USING TECHNOLOGY TO GO BEYOND THE TRADITIONAL MANDATE OF CLEANER AND GREENER, IS NOWHERE MORE APPARENT THAN IN THE RAPIDLY EMERGING SECTOR OF FINTECH - A SECTOR WE BELIEVE TO BE AT THE HEART OF RESOURCE EFFICIENT INVESTING.

Fintech has undoubtedly taken the world of financial services by storm, creating new categories such as peer-to-peer lending, mobile payments, virtual currencies, smart money transfer to name a few. Sustainability within the sector comes in two guises. First order resource efficiency in fintech is the carbon abatement effect – the reduction of paper or even power or replacing hardware altogether. Second order savings go beyond traditional sustainability and regard capital as a resource. Fintech companies are disintermediating banks and enabling a mechanism to allocate capital in a highly efficient manner. Inefficiencies are widespread in the financial services sector, and it is poised for technological disruption.

SMEs have more choice today

One area for significant resource efficiency lies in addressing the financial needs of small and medium-sized enterprises (SMEs). SMEs are a significant driver for the global economy, representing over half of global GDP and employing nearly two thirds of the global work force. And yet they have been historically underserved due to incumbent banks’ ineffectiveness in dealing with the sector’s high complexity. Today SMEs have real choice when it comes to financial services, and there has never been such an efficient system for completing financial transactions. Companies like Lending Club, the world’s largest online marketplace offer crowdsourcing and bring lenders and borrowers together for a fraction of time, money and effort required previously. Ditto for money transfer, which, until now this was an extremely complicated and costly business for SMEs. The business has now been transformed by peer-to-peer money services like Transferwise, backed by Richard Branson. 
There are other financial technology companies such as mobile payments firm iZettle and financial supply chain company Taulia that are advancing efficiency disruptions in financial services, as recognised by a recent World Economic Forum report. By leveraging combinations of mobile technology, enterprise software and big data analytics, whilst both very different, these companies are able to streamline business processes, such as payments and invoicing, and offer highly competitive products based on a much deeper understanding of the needs of their customers. iZettle, for example, enables even the smallest of market traders to take payments in the same way as larger companies by turning phones into effective POS terminals. This has a huge and positive impact on their businesses. Indeed, evidence has shown that simply having the ability to take card payments can transform a business and lead to significant increase in sales.