Why every business needs to know what financial technology is
The fintech market has grown exponentially over the last few years, reaching a predicted USD 310 billion in 2022, an increase of USD 182 billion on 2018. As businesses across the world adopt fintech solutions, many are still being left behind by the digital revolution, using archaic means of payments processing to fulfil orders and complete backend processes.
Legacy payment methods heighten the risk of B2B payment fraud and emphasise the need for organisations to utilise a tech-enabled payments infrastructure to secure their capital against fraudsters. However, fintech is changing the landscape, offering fast, secure, transparent cross-border remittance to organisations across the world.
Payment fraud on the rise
In business, security is the resting pulse of success, but many small and medium sized businesses are failing to protect their capital in the fight against fraudsters. A frequent assumption is that legacy payment methods such as checks and wire transfers are a thing of the past — but this is incorrect. According to the U.S. Fedwire Authority, over 204 million individual wire transactions were logged in 2021, amounting to nearly one quadrillion USD, with much of that coming from international transactions.
Unfortunately, criminals are leveraging outdated payment methods for monetary gain, utilising virtual interaction platforms to hack emails and spoof business leaders’ credentials to initiate fraudulent wire transfers. Considered a federal crime in the US, wire transfer fraud is on the rise, and hitting businesses hard.
In December 2021, a wire transfer of over USD 1.5 million to a fraudulent U.S. domestic bank account was intercepted by the Internet Crime Complaint Centre (IC3), freezing the funds and making a full recovery possible. But, with over USD 6.9 billion lost to fraudulent transfers in 2021, and an estimated 12–15 percent of all wire transfers going unreported, many businesses are not so lucky. Fortunately, efficient, all-in-one financial technology methods revolutionise the payments industry, securing cross-border payments against criminals.
Prevention over cure
Financial technology is expanding its scope and efficiency in the international banking sector, with virtual accounts taking minutes to set up, while online cross-border payment methods are becoming efficient, accessible means of payment remittance.
Preventing fraud through online payments providers is simple, and businesses can gain peace of mind on their international transactions via encrypted two-factor authentication and in-app SMS verification procedures that verify the recipient and payee.
Managing all of your revenue currencies and paying a supplier directly, within an all-in-one payments platform, future proofs businesses against the risks that are present in wire transfers, which often go through multiple intermediaries. The payments space, and the criminals that operate within it move faster than banks can keep up.
Innovation requires technology
The mercurial nature of the payments space suits fast-moving technological methods that can evolve with the times, verifying and vetting suppliers in foreign countries, and ensuring their bank account information is linked to that company so that organizations do not have to.
By using all-in-one payments providers, businesses are able to leverage their large supplier network to ensure that all uploaded invoices are verified to ensure that recipient information is accurate. This helps customers avoid losses from false invoices or altered routing information that would benefit fraudsters. Ensuring that validation on both sides of the transaction takes place is an additional layer support to ensure businesses can scale internationally while limiting risk.
Growth as an opportunity
The adoption of fintech will prove to be a useful instrument in an organisations’ toolbox, as US businesses mitigate the evergreen risks associated with wire transfers. However, financial technology can also expand a businesses’ event horizon for international growth. A study by PriceWaterhouseCoopers found that 94% of financial services were confident that fintech will drive business expansion over the next few years. Trust in fintech within the banking space has shown that 47% of financial service companies worldwide are likely to collaborate with a fintech firm, illustrating the changing attitudes towards technology.
US businesses that implement fintech solutions to automate their backend processes and cross-border transfers can improve the agility, security, and flexibility of their payments’ infrastructure. By venturing into more international markets using the accessibility of financial technology to send and receive payments around the world at a fraction of the time and expenditure it would take to set up a local bank account, SMEs can reinvest funds back into their growth strategies, representing a more efficient and common-sense approach to payments.
As the global cross-border payments market is expected to reach USD 156 trillion in 2022, securing your payments infrastructure against malicious actors and expanding internationally will be the keys to ensuring business success going forward. Wire transfers and legacy methods of cross-border payment are outdated, and organizations must adapt to the increasing global swathe of digitisation, and adopt advancing technological processes to secure capital against concerted efforts to steal funds.