The world is increasingly more digitalized, and technology permeates almost into every nook and cranny of modern life. We have seen a remarkable amount of attention to detail and overall emphasis surrounding exactly how, when, where, and why technology has impacted our lives at all levels, for better or for worst. We are seeing the world around us become more powered by digital and technological design and intent. And for the most part (and in most instances), it has been quite a welcome transformation. In some cases, the transformation has been expected. In others, it has been entirely unprecedented. Either way, change has been inevitable and necessary.
The finance industry over the years
In so many different ways, the finance industry plays such a strong leading role in how the world around us functions and thrives. From fintech startups that revolutionized payments across borders to neo-banks and P2P platforms serving the underbanked.
The only important point to note is that this has in some ways worked against us in the long run. Thankfully, we are now entering into the digital era, an age that is entirely focused on finding more meaningful and sustainable ways to move forward. In the finance industry, every moving piece that has proven itself to be successful has ultimately become a key component of the way that the industry functions and thrives today – as well as how it is going to be able to continue to do so well into the future and beyond.
The advent of impartial robo-advisors can help retail investors make better investment decisions with their life savings without any prejudices or biases of a traditional wealth advisor. Blockchain and decentralized finance will soon power all aspects of trade financing and potentially bring fractional investing in traditionally accredited asset classes to the masses.
The finance industry in the digital era
Of course, each and every moving piece plays an key role in how the finance is able to continue to pursue and achieve longevity and success. In the digital era, the finance industry has gone from strength to strength with increasingly rapid succession. Blockchain technology is well positioned to transform overseas trade financing from a cumbersome process to a paperless ledger flow. Blockchain and decentralized finance could also potentially bring fractional investing in traditionally accredited asset classes access to the masses. Robo-advisors are transforming how people invest, with lower costs, impartiality and higher predictability without the intrinsic biases and prejudices of traditional wealth advisors. Lending algorithms powered by machine learning and AI provide traditionally underbanked SMEs with much needed credit to survive and expand.
The important role of SME loans
Think of SME loans, for instance. In short, SME financing refer to the capital and debt funding of small to medium sized companies. SMEs are typically the backbone of most advanced economies. As for the role of SME loans, they essentially bridge working capital gaps and break down barriers to allow these enterprises to be able to fund their business with credit facilities.
Today, SMEs no longer have to visit a bank’s branch to submit a loan application. Most banks now provide virtual channels for online digital loan applications. Credit underwriting time is also shortened as banks start adopting lending algorithms powered by data and artificial intelligence. There are also SME loan comparison portals that aggregates all banks financing facilities for easy access to lending options. It has never been easier for small businesses to access and tap into financing to fund their operations and working capital.
Machine learning credit models are also a potential game changer in the SME financing space, disrupting mainstream banks traditional credit underwriting programs. More alternative sources of credit worthiness could be factored into credit assessment matrix in real time, such as industry performance, utility and telco payment records as well as online reviews of businesses. These soft data can be refined and optimized further when sufficient data are fed into machine learning credit model to reach critical mass.
With greater access to credit and financing, entrepreneurship and self-employment will create more vibrancy in the economy, leading to a virtuous cycle of innovation and productivity. With the availability of SME financing, more startups and underserved small businesses could also gain access to vital funds to continue innovating breakthroughs on their products and services. Economies with a strong and stable SME sector coupled with healthy entrepreneurship zeal within their populace are well poised to grow from strength to strength economically and financially.