Small and medium-sized enterprises (SMEs) represent around 95% of the economic fabric. Their importance in the recovery of these is indisputable, but they do not always have the necessary resources or support. In this context, FinTech companies constitute a fundamental support for its success. For a rapid economic recovery, SMEs and FinTech must go hand in hand. Randall Castillo Ortega, founder of SME investor RACO Investment and FinTech expert, explains why FinTech entities are the best partners for SMEs.
Funding, payment management, partnerships and RegTech (regulation technology) are the four pillars on which small and medium-sized businesses can achieve their survival goals in the market. Says Castillo, Not all SMEs have had easy access to financing from traditional entities. Companies in the FinTech environment dedicated to alternative financing have given small and medium-sized enterprises a break in this regard.
Thanks to crowdfunding and crowdfunding platforms, small businesses find financial support from private investors. They offer investment alternatives in an agile and fully digital way. In the case of crowdlending, the return of the invested capital is offered in addition to interest. But there are other formulas, such as equity crowdfunding, where you invest in a company in exchange for a stake in its social capital or income-based finance, a model that offers a more user-friendly financing alternative. . They receive an advance which they pay back with a percentage of the income they generate.
Many companies in the FinTech network offer innovative payment management solutions: cryptocurrencies, loans, electronic payments, personal or investment financial control. These are new business models that take advantage of technology to respond to new forms of consumption and from which small and medium-sized businesses benefit greatly. To survive, SMEs must scale at the speed of the market and thanks to FinTech, they can do so in an agile, simple and comfortable way, says Castillo.
The creation of new products and services and the use of technology to improve processes such as banking are essential to facilitate the management and development of SMEs. FinTechs provide them with the technological innovation they need to reduce their costs and provide better service to their customers.
According to some studies, in order to register through a non-face-to-face identification process, all the customer needs is access to the Internet, a computer or mobile device with a webcam and its own room. identity in force. But what are the technological components that allow this method of non-face-to-face identification of customers? Facial biometrics, automatic document recognition and verification, identity management platforms and many other technologies are behind these breakthroughs in innovation which, in many cases, have been driven by the FinTech.
In the RegTech concept, technology companies are grouped together with the aim that certain companies improve their internal processes to comply with the regulatory framework. Thanks to big data or cloud computing, RegTech helps SMEs reduce their costs and efforts and allows them to adapt in an agile way to any type of regulatory change.
The climate of understanding and seeking synergies between traditional banking and FinTech even reaches the world of crowdlending. Indeed, many banks use these platforms to co-invest with individuals when financing loans to SMEs. In some markets these are private or investment banking entities, but in markets like the US and UK even commercial banks are joining the pool of investors. At the end of the day, the company’s goal is to find the best way to monetize its liabilities, and that doesn’t always go through the banks. Relying on FinTech solutions and private lenders provides a solution that is going to be proactive in supporting the business.
About RACO Investissement
RACO Investment is a financial investment company serving small and medium-sized businesses in Panama and Costa Rica. It was founded by Randall Castillo Ortega, an expert financial advisor who has his roots in the import and export industry in Latin America. The company has helped many startups find the financial support they need to get started, and has also provided bridging loans to help those looking to restructure or improve their operations.
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