The convenience economy has changed the consumer lifestyle fundamentally, from waiting for cabs to hailing an Uber ride, from calling travel agents to book hotel rooms to booking an Airbnb stay, going out in busy markets to buying on ecommerce platforms like Amazon, from navigating busy streets for finding something to eat to now ordering from Doordash in minutes. The list is endless. Fintech has evolved several times over to power all these services with mobile-first approach, at an unprecedented pace.
Financeonline highlighted the following trends in fintech transformation fuelled by changing consumer behavior:
2 out of every 3 financial transactions are now made online
64% consumers have used two or more fintech platforms or services
Over $50 billion is invested in fintech startups every year
So, what keeps financial operations teams at an ecommerce or convenience business up at night?
Savvy consumers mean heightened expectations about experience, not just about what they buy but also about how they buy. Whether it is multi method payments, buy now pay later, pay with points, they need a robust technology foundation for their systems that can support these ever changing and growing expectations. Here are some of the problems they run into:
1. Their Fragmented fintech stack is difficult to integrate, maintain and scale
The current fintech stack solutions are so purpose-built and siloed that they solve only one problem at a time, that too for just one part of business. These tools lack interoperability and do not talk the same language.
Add to this, the fintech innovation at speed of light and new tools coming
everyday. A myopic approach to building solutions that support is likely to hurt your agility and customer experience because
- It is chaotic to manage and maintain multiple tools spread across departments
- End users have to constantly learn and unlearn new technology hurting their efficiency
- Data consistency and validation concerns arise with lack of single source of truth
- Designing and operationalizing integrations to achieve seamless data flows becomes challenging
- Security and compliance might be compromised, and access controls can become a nightmare to manage
2. 100% accurate, consistent and scalable outcomes
The convenience economy adds a massive onus on real-time. You need to monitor every single financial movement - as it happens - not just inside your organization but also across your partners. Globally across the internet, billions of events get created every single minute - when a service is delivered, a product is shipped, an order is approved etc. These micro-moments events act as inputs to various business use cases such as fee calculation or commissions management, revenue recognition followed by reporting of sales, revenue and cash. At this scale, all manual efforts will fail.
You need robust systems that can capture these events in real-time and project true financial implications to the business; in a programmatic, secure and accurate way. It is essential for finance teams to have access to this information to course correct business operations, identify frauds or aberrations immediately, rather than in a month or a quarter.
3. Lack of infrastructure around security and compliance needs
Any financial operations solution you use needs to be current and compliant with contemporary data laws and should be flexible enough to incorporate any new data localization laws. Any bullet through the systems security armor can set your business back several millions of dollars in fines, lost revenue and priceless customer trust. A growing set of compliance standards like ISO 27001 (), SOC Type 2, Encrypted Data at Rest and Transit and IP Whitelisting have presented challenges to existing systems.
4. Support innovation customer-centric use cases without downtime
A company’s financial stack requirements change as the company evolves its business. A true financial operation platform helps businesses architect and embed existing and new workflow within a matter of hours. Having prebuilt blocks that support dynamic use cases at scale and integrate with new partners and vendors for a seamless customer experience is a key differentiator. Teams should be able to get up and running with the available building blocks to spin up new value-added services in no time.
5. Opportunity cost with build vs buy
Every time you’re spending resources, whether time or money, on customizing legacy systems or maintenance, you’re depriving yourself of precious dollars that you can use for your core product. Let’s take a very popular example, Amazon Web Services (AWS) handles the data center infrastructure for Netflix so that Netflix can focus on content creation and audience experiences instead of IT. One can only imagine if Netflix prioritized capital expenditure on in-house IT over strengthening its product offerings when pivoting from DVD rental to streaming, would they have been able to grow this fast?
Similarly, investing in agile and scalable financial operations on-demand solutions can help you fluently manage complex use cases that are thrown at you by customer expectations, in no time and at scale. Almost every company that tries to build these solutions internally ends up back to square one either because of inability to recalibrate constantly for scale, mobility of technical talent, growing compliance and changing business models, this results in big IT write offs and hurts their bottom line.
6. Good payments engineers are in short supply
Talent that can effortlessly bridge the gaps between finance and technology isn’t easily available. Current finance teams are still spreadsheet dependent and use extremely manual processes to perform their responsibilities. The risk averse nature of finance, especially because of the high cost of failure has left them gasping without innovation in a high growth environment. Getting access to payments engineering talent isn’t easy either. Building solutions in-house is a multi-year project and not a lot of people in tech jobs stay around for long, definitely not in thankless jobs. We’ve seen this repeatedly in boomerang customers, who choose not to buy our solution in favor of building it themselves and end up with almost nothing to show for months later when their talent departs.
Modernize your financial operations today
With CEOs increasingly relying on CFOs to navigate through challenging markets, will finance teams be able to keep up despite ageing processes? It might be worthwhile to reflect on these questions
- Should we throw more people at the problem?
- Is it ok to continue to use clunky spreadsheets in favor of automation?
- Are we ok with stale month later or quarter later data?
- Can we afford to tolerate error rates due to complexity in payment gateways that impact P&L?
- Can we still retain customers with substandard experience attributable to inefficiencies in our financial processes?
Find out how a solid technology foundation can set your finance teams and ultimately your business up for success at recko.io.