Advance your knowledge with a Fintech 201 guide
As many accounting professionals know, innovation in business often follows innovation in the consumer experience. Businesses typically make changes based on consumer expectations, but accountants have to think about how to survive given that innovation is happening faster than their businesses can change.
That’s according to Michael Ly, CEO of Reconciled, a full-service virtual accounting firm. Ly has built her online practice solely on the principle that innovation should be a priority. Additionally, using the right technologies and anticipating the impact on the profession and the clients he serves were critical to the success of his business.
While Reconciled allows businesses to purchase subscriptions to its services directly from its website, Ly acknowledges that most businesses don’t operate that way.
“It’s a huge transformation that has yet to happen,” Ly said.
In order to innovate, accountants and businesses need to consider consumer behavior and what consumers expect when buying services, i.e. the ability to buy online. While some companies haven’t moved fast enough to keep pace with consumer behavior, others are on the cutting edge and want to take another step towards competing in the new world of fintech.
Ly said a company can take several approaches: building a fintech from scratch, buying an existing fintech and offering it to customers, or partnering with a fintech company to achieve common goals. Choosing the right approach for your business depends on its size and financial situation. While the best companies have the ability to do all three, small and medium-sized businesses should choose one that won’t put a financial strain on the business.
“Building a fintech literally means hiring engineers and creating a mini fintech start-up within your company. You can start with something as simple as a financial dashboard. You need to have an entrepreneurial environment and resources dedicated teams that can focus on this innovation, along with realistic measures of desired outcomes,” Ly said.
On the other hand, buying fintech allows a company to build on existing infrastructure and offer it to customers as an additional option in the company’s software suite. A company can literally buy a fintech company or application or license the technology.
“When buying, the biggest beneficiary is usually the company you’re buying from, but you’re leveraging the software to strengthen your relationships with your customers,” Ly said.
The third option, partnering with an already existing fintech company, allows the company and the fintech company to align their goals and customers. You can partner with a market strategy, creating a “win-win” situation for both parties, Ly said.
Before moving forward with an option, companies need to be realistic about where they stand in terms of innovation: in other words, is your company “traditional” or are you already using the cloud and are you ready for the next step?
Ly suggests that companies ask themselves the following questions:
- Do you have the resources to devote to this next step, and who will lead the project?
- How much are you willing to commit financially?
- What problem are you trying to solve?
In answering the last question, Ly suggests surveying customers to find out if they have any problems that fintech can actually solve.
“If it happens that a fintech solution can solve their problems, so much the better, but it may not be a fintech product; it may be something else. This exercise will help prevent a lot of headaches in the future,” Ly said.
If there really is a hole in the market and your customers aren’t being well served, ask yourself if your company is the right company to offer a solution.
“If most of your clients are struggling to raise funds or access capital, it’s actually a very easy lift because there are already partners and companies that will license you their dashboard” , said Ly.
Regardless of the approach taken, companies need to do their due diligence to ensure that they are presenting their customers with a reliable solution. For example, most companies won’t want to introduce a startup to their clients unless it has enough support to signal that it will be around for a while and the founder has established trust in the business. accounting, Ly explained.
“As a business owner, you’ll want to consider the credibility of the fintech app, whether they have other accounting firm clients, whether they’ve attended accounting conferences, whether you can get access to the founder or following C to ask them questions and if their mission is aligned with yours,” Ly said.