{"id":13409,"date":"2023-08-11T12:26:18","date_gmt":"2023-08-11T06:56:18","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=13409"},"modified":"2025-01-03T15:39:27","modified_gmt":"2025-01-03T10:09:27","slug":"fintech-for-small-businesses","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/fintech-for-small-businesses\/","title":{"rendered":"How Fintech is Revolutionising the Small Business Landscape"},"content":{"rendered":"

Starting a business today is easier than ever \u2013 and it\u2019s mostly thanks to fintechs.\u00a0<\/span><\/p>\n

Fintechs, or financial technology companies, offer software solutions to help businesses with their money. There are many types of fintechs: lending fintechs, insuretech, payments \u2013 but they all centre around one thing:\u00a0<\/span><\/p>\n

Finance made easier with technology.\u00a0<\/i><\/b><\/p>\n

Fintechs have had the biggest impact on the smallest businesses. MNCs and bigger businesses have always been able to afford entire teams of financial professionals to handle their money for them. It\u2019s the smaller, younger businesses that need help.\u00a0<\/span><\/p>\n

What did fintechs do for SMEs?<\/b><\/h2>\n

Here\u2019s a list of the major obstacles that young founders have to overcome in their journey to starting a business.\u00a0<\/span><\/p>\n

    \n
  1. Gathering capital<\/span><\/li>\n
  2. Tax compliances<\/span><\/li>\n
  3. Accounting and regulatory compliances<\/span><\/li>\n
  4. Time management amidst high growth\u00a0<\/span><\/li>\n
  5. Detailed financial insights for better decision making<\/span><\/li>\n<\/ol>\n

    Do you see a pattern? The common thread that runs through all these problems is <\/span>money. <\/span><\/i>Good money management<\/a> is the make-or-break for most small businesses.\u00a0<\/span><\/p>\n

    This is where fintechs come in. Before we get into the details of how fintechs helped the startup economy, let’s understand what the fintech landscape looks like in India.\u00a0<\/span><\/p>\n

    The fintech landscape in India<\/b><\/h2>\n

    \"\"<\/p>\n

    With the support ecosystem that India provides to young founders, it is no surprise at all that India is home to so many extremely successful startups. Here are all the different kinds of fintechs that are part of this support system.<\/span><\/p>\n

    Banking and lending<\/b>: Traditional banking is robust, but unable to keep up with the fast-evolving needs of today\u2019s startups \u2013 no founder today wants to sit around and manually execute payroll or hundreds of vendor payments.<\/span><\/p>\n

    Neobanks<\/a> or banking fintechs like Revolut and RazorpayX solved this problem by offering <\/span>online-only current accounts<\/span><\/a>, automation, integrations and other tech-based solutions.\u00a0<\/span><\/p>\n

    What is RazorpayX?<\/a><\/div>\n

     <\/p>\n

    Payments<\/b>: With the rise of digital payments, UPI and buy-now-pay-later systems, fintechs have managed to improve payment tech much faster than traditional banking.\u00a0<\/span><\/p>\n

    Investing and wealth management<\/b>: Fintechs like Zerodha and Groww offer wealth tech to make investing and wealth management accessible to every retail investor out there.\u00a0<\/span><\/p>\n

    Insurance<\/b>: What used to be a complicated, dusty industry that resisted all change is now sleek, new and much easier to use. Insuretechs like Acko and GoDigit Insurance have managed to make personal and corporate insurance more approachable than ever.\u00a0<\/span><\/p>\n

    Regtech<\/b>: This is a newer, upcoming category of fintech that develops software to help startups with their regulatory compliances \u2013 be it accounting, tax or legal.\u00a0<\/span><\/p>\n

    It’s important to note that since fintechs are not banks or NBFCs, they don\u2019t have the license to lend or hold deposits. To solve this, most fintechs choose to partner with a licensed bank or NBFC.\u00a0<\/span><\/p>\n

    Benefits of fintechs for SMEs<\/b><\/h2>\n

    Here\u2019s the story so far. Startup founders had it hard, and fintechs made it easier. But how exactly?\u00a0<\/span><\/p>\n

    Easy access to credit<\/b><\/h3>\n

    The first problem that any founder faces \u2013 capital. You need money to make money, and startups are the best example.\u00a0<\/span><\/p>\n

    Traditional banks, in the days before fintechs, were very resistant to lending to startups.\u00a0<\/span><\/p>\n

    This is because startups are a risky affair \u2013 while they are high-growth, there is always the chance for a young startup to go belly up and end up bankrupt.\u00a0<\/span><\/p>\n

    Then came <\/span>lending fintechs<\/span><\/a> like Upstart and Growth Capital, offering loans and credit to startups. The perks were endless: flexible terms, lower interest rates, no collateral.\u00a0<\/span><\/p>\n

    These lending fintechs acknowledged the risk of doing business with startups, but they believed in the potential of the Indian startup ecosystem. And it paid off!\u00a0<\/span><\/p>\n

    This pushed traditional banks to also start offering loans to startups, and ICICI Bank launched its StartupXcelerate program in 2016 \u2013 a whole <\/span>five<\/span><\/i> years after the first lending fintech <\/span>Indifi Technologies<\/span><\/a>!<\/span><\/p>\n

    Automation and integrations<\/b><\/h3>\n

    Big businesses and MNCs have huge finance teams. These huge finance teams run the entire business\u2019s financial operations \u2013 executing payroll, maintaining books of accounts, managing vendors and customer accounts, ensuring compliance with regulations, paying taxes correctly and on time\u2026<\/span><\/p>\n

    The list is endless.\u00a0<\/span><\/p>\n

    But what about small businesses and startups? Young businesses usually have a finance team consisting of two, maybe three people in total, handling <\/span>all <\/span><\/i>those operations and more.\u00a0<\/span><\/p>\n

    Things are made worse when you consider the possibility of human errors, manual entry, and lapses in judgement \u2013 financial management for startups was quite a daunting task.\u00a0<\/span><\/p>\n

    At least, before fintechs used the magic of automations and integrations to solve this problem.\u00a0<\/span><\/p>\n

    Here\u2019s what automation did for businesses:<\/span><\/p>\n

      \n
    1. Bank accounts integrated with accounting software<\/span><\/a> so that transactions are automatically recorded into your books of accounts<\/span><\/li>\n
    2. Automated calculation and payment of taxes<\/span><\/a> to avoid missing a deadline and having to pay penalties<\/span><\/li>\n
    3. Automated <\/span>payroll<\/span><\/a>, <\/span>vendor<\/span><\/a> and customer payouts so that you don\u2019t have to spend hours executing hundreds of payments<\/span><\/li>\n<\/ol>\n

      Streamlined payments\u00a0<\/b><\/h3>\n

      Over the years, more and more businesses have become entirely online entities. Ten years ago, if you wanted a pair of shoes, you\u2019d have to go down to your local shoe store. But today, Amazon does one-day delivery right to your doorstep.\u00a0<\/span><\/p>\n

      The more businesses went completely online, the more they had to streamline their payment processes. They needed a way to accept payments online, and this is where fintechs swooped in,\u00a0<\/span><\/p>\n

      With the introduction of UPI and other online payment options like BNPL, people started <\/span>preferring <\/span><\/i>online payments over offline or COD payments \u2013 being able to pay online means you can choose from a wider variety of options.\u00a0<\/span><\/p>\n

      Cost cutting\u00a0<\/b><\/h3>\n

      This is the end result of those magical fintech solutions \u2013 a <\/span>lot <\/span><\/i>of money saved for startups.\u00a0<\/span><\/p>\n

      When you\u2019re not wasting money, time and resources on manual tasks or paying penalties for late or incorrect tax payments, you\u2019re putting that money into the growth of your business.\u00a0<\/span><\/p>\n

      Startups today are able to save lakhs of rupees and hundreds of hours by using these fintech-enabled solutions for their business.\u00a0<\/span><\/p>\n

      Speak with an Expert<\/a><\/div>\n

       <\/p>\n

      Laws and regulations around fintech<\/b><\/h2>\n

      The rapid growth of fintechs means it’s been largely an unregulated sector for a while \u2013 but the RBI is very quickly catching up.\u00a0<\/span><\/p>\n

      In the past few years, the RBI has issued guidelines and established rules for the fintech sector as it tries to tame this high-growth industry and reduce the risks involved.\u00a0<\/span><\/p>\n

      Here\u2019s a quick list of the steps that the RBI has taken to regulate fintechs in India:\u00a0<\/span><\/b><\/p>\n

      Digital Lending Guidelines<\/b>
      \n<\/b><\/p>\n

      The RBI’s Digital Lending Guidelines<\/a> were issued in September 2022.\u00a0<\/span><\/p>\n

      These guidelines aim to promote responsible digital lending and protect consumers from fraud and abuse.\u00a0<\/span><\/p>\n

      The guidelines cover a wide range of aspects of digital lending, including:<\/span>
      \n<\/span><\/p>\n