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The role of fintech as a catalyst for resilience for smaller suppliers in the digital age

digital age

Resilience is now a critical driver for success for many companies in today’s turbulent business environment. Historically, smaller supplier companies have had extreme difficulties due to market volatility, cash flow fluctuations and financial uncertainties. Nonetheless, a new age has been ushered in by FinTech, enabling these organisations to withstand adversities and tap into untapped avenues of growth.

Before the advent of FinTech, small-scale suppliers faced major challenges which could destabilise them. Their vulnerable conditions were a result of having little or no capital coupled with ineffective cash flow management tools with unspecific financial services. Hence those kinds of enterprises were ultimately affected when economic stagnation hit them or market trends underwent a mutation. Steering through such complex financial conundrums carried high stakes sometimes leading to potential instability.

Resilience, financial inclusion, and broadened opportunities

The tale of resilience and financial inclusion can be well understood through Kirana stores’ evolution in India. Though it might sound like a bit of history, many experts did project the demise of local mom-and-shop due to the onset of big ecommerce players. But as the pandemic (COVID-19) hit, where almost all big corporations were standstill, our local retailers stood strong and kept the essential deliveries functioning. Fast forward to today, they have quickly adopted the rising tech further facilitating extensive financial inclusion and Fintech has been an anchor for this evolution.

The role of fintech thus can’t be undermined. For leading financial services providers targeting the unbanked population in India, a phygital (combining physical and digital) strategy is at the core, bridging the gap between urban and rural financial services. This unique approach enables them to offer a seamless and efficient banking experience, catering to the diverse needs of a vast population. They leverage an extensive network of physical access points (like banking correspondents and micro-ATMs), coupled with user-friendly digital platforms, and are making financial inclusion a reality even in the remotest areas of the country.

The transformative potential of fintech in promoting financial inclusion and empowering small businesses with broadened opportunities is further highlighted in the International Finance Corporation’s (IFC) report. According to their estimates, fintech can provide access to financial services to 1.6 billion unbanked people worldwide and 200 million small businesses or entrepreneurs.

Streamlined operations and financial risks

Small suppliers can benefit extraordinarily through fintech adoption in their operations. Automating manual processes, reducing paperwork, and allowing seamless data integration becomes a boon with innovative fintech solutions freeing up time and resources for core business activities. Businesses can utilise this heightened efficiency to ensure cost savings, improved productivity, and a competitive edge in the marketplace.

Alternately, fintech also supports mitigating financial risks and ensuring a company’s stability in the competitive business world. Businesses enjoy robust safeguards against financial threats (like sophisticated fraud detection systems and robust cybersecurity measures). Additionally, smaller suppliers make informed decisions through advanced credit scoring models and risk assessment tools that help minimise potential pitfalls and promote long-term stability.

Expanding capital access

Smaller suppliers often faced a lack of access to capital that hindered their growth and resilience. Fintech has disrupted this scenario by presenting innovative lending platforms, crowdfunding opportunities, and alternative financing options. Consequently, small suppliers now get new avenues led by data-driven risk assessment models and streamlined processes that secure the required capital for investment, expansion, and weather economic storms.

Data-driven insights for strategic decision-making

The age of big data has unveiled an incredible opportunity for smaller suppliers to harness the strength of valuable insights through fintech solutions. Fintech tools collect and examine large amounts of economic and operational facts, further resulting in uncovering valuable styles, traits, and opportunities that have been formerly hidden or tough to determine. With these invaluable insights, smaller suppliers can make informed strategic selections, optimising aid allocation and proactively identifying and relieving potential dangers. This data-driven method amplifies their normal resilience and empowers them to cope with the challenges with extra confidence and agility.

Real-world case studies of resilience

FinTech is integral in amplifying resilience for smaller suppliers across industries and geographies. Various case studies highlight the transformative power of fintech in building resilience. They include e-commerce retailers leveraging FinTech solutions, managing supply chain disruptions, and small manufacturing firms utilising FinTech tools to maintain cash flow during economic downturns. One such case study is by the Asian Development Bank (ADB) which found that fintech-enabled digital supply chain finance solutions helped underserved businesses in Asia-Pacific countries manage cash flow challenges ensuring business continuity and resilience.

In times ahead, fintech’s role in strengthening smaller suppliers’ resilience would expectedly become more vital. Factors (like continuous technological advancements, increased adoption, and a deeper understanding of the unique needs of smaller enterprises), shall make fintech more prospective through its wide array of comprehensive solutions. Moreover, integrating cutting-edge technologies like artificial intelligence, machine learning, and blockchain will further enhance fintech’s capabilities to unlock new dimensions of resilience. Lastly, real-time risk monitoring, predictive analytics, and secure, transparent supply chain management are just a few examples of how FinTech will continue to support smaller suppliers against market volatility and unexpected challenges.

Author: Amit Nigam, Executive Director & COO, BANKIT

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinions or policies of ObserveNow Media. The author is solely responsible for ensuring the accuracy, completeness, and validity of the information presented, encouraging readers to independently verify and seek professional advice if needed.

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