Fintech Innovation and Its Implications for Supply Chain Management
Fintech is a portmanteau of financial technology. This type of tech enables or supports financial processes and services. As one of the fastest-growing areas for venture capitalists, fintech is a hot topic, especially for e-commerce and supply chain management industries. When managed correctly, fintech can completely transform the way businesses manage second and third-party payments between B2B relationships, bringing speed and efficiency to the forefront of global banking systems.
But despite its growing popularity, fintech and its various implications for supply chain management are still relatively new. This leaves us with many questions about its implementation and whether it’s worth it.
In this article, we look at what benefits can be achieved by integrating innovative fintech solutions for supply chain management and address some potential challenges it may create.
How Can Fintech Benefit Modern Supply Chain Management Methods?
Supply chain financial technology has come a long way in the past few years. But it’s about to go even further. There is much more to the supply chain industry than just moving boxes and ticking boxes. It’s an extremely data-reliant system that requires multiple checkpoints and processes to flow smoothly.
While the word “fintech” covers a broad spectrum of different technological payment systems and processes, when it comes to the supply chain industry, it usually refers to one or more of the following:
- Mobile banking
- P2P payment services (Venmo, CashApp)
- Blockchain
- Digital lending and credit
- Automated advisors
Ultimately, fintech seeks to improve and automate payment processes via the use of technology. This could look like instant international payments from vendor to supplier, digital stock trades, and much more in the supply chain industry.
Let’s take a look at some of the main benefits of fintech in this industry.
Increased speed and efficiency
Businesses no longer need to rely on manual paper systems to facilitate payments between multiple parties. By using a digital wallet, QR code, payment link, or any other integrated transaction method, fintech solutions allow for instant payments. This speeds up transactions and expedites every leg of the payment and delivery process.
Most fintech solutions can be accessed via mobile, making it a quick, easy, and highly accessible way for businesses to make payments. This increases productivity, saves time, and promotes general efficiency.
Enhanced visibility
Fintech may still be considered young in the grand scheme of things, but it certainly isn’t new. In fact, it’s already a huge part of consumers’ and businesses’ lives, to the point that many people suspect that it will completely replace manual payment methods in the future.
Adopting fintech in supply chain management means meeting the rest of the world where it already is. This can increase your brand’s visibility and show consumers that you are up to date on all the latest transactional trends that they know and love.
Considering how many other businesses have already switched to fintech systems, following suit can expose businesses to a much wider variety of potential partnerships and brands.
Reduced costs
The streamlined nature of fintech allows companies to cut down on the costs often associated with individual payments. This can help businesses save money on each transaction, allocating money to different areas.
Traditional payment systems require a surprising amount of resources, including paper, pens, ink, and printing costs. Even digital invoices can be expensive to process.
Integrating a fintech framework for supply chain management removes the need for any of these physical items. Instead, it creates an opportunity to manage funds in a more sustainable way. It also improves inventory management, as it ensures that stock levels are automatically adjusted based on payments processed. This saves costs, too, as it reduces over-ordering, wastage, and dead stock.
Happier trade partners
When you’re working with slow, outdated payment systems, it can put strain on professional relationships between trade partners, clients, and anyone else your business is sharing transactions with.
But fintech changes that. With all the efficiency and time-saving perks that come with these technological solutions, relationships can become more functional and satisfying for vendors. This promotes a healthier dynamic of communication and mutual respect than what is possible with older, less efficient systems.
The Potential Challenges Of Using Fintech For Supply Chain Management
As advantageous as using fintech for supply chain management can be, it’s not without challenges. Like every new technology, especially one with this much potential for scalable change, fintech has a few cons to balance out all the pros. Let’s take a look at them:
- Integration – Integration is by far the biggest challenge presented by fintech in this context. The existing systems and processes utilised will all need to be uprooted and reconfigured, which will be a huge undertaking.
- Regulation – Financial systems must be heavily regulated to be fully safe and sustainable. Ensuring compliance with applicable regulations will likely be difficult to implement.
Security – The fintech framework requires the exchange and storage of sensitive financial data, which makes security imperative. Ensuring that every party’s data is completely secure from unauthorised access is key to establishing a functional fintech supply management system.
Fintech And The Future Of Online Stores
Supply chains aren’t the only systems that can benefit from fintech innovations. By adopting modern fintech solutions, e-commerce platforms can streamline back-end operations and deliver faster, more efficient services to their consumers.
There are plenty of opportunities for fintech to enhance the online shopping experience, such as faster payment transactions, better brand money management, and a wider variety of vendors and suppliers who can collaborate with large-scale online store platforms.
When combined with data-driven SEO and other online performance-enhancing marketing strategies, fintech can—and already is—a powerful driver of success.
A Fintech-Focused Future
Fintech is making major inroads in improving supply chain management, and experts say it’s here to stay. When you look at how it works, it’s easy to see why. Fintech is faster, cheaper, and more efficient than other financial transaction systems, allowing businesses to save both time and money.
However, as we’ve seen, fintech is still a way off from being perfect. There is security, integration, and regulation to consider. But for now, fintech is paving the way for more innovative, profitable supply chain management across the world.
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