Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 188

Fintech platforms disrupting business finance

The term 'fintech' covers a wide and ever-growing range of technologies. This article explores some of the biggest game-changers, and how they’re impacting the way businesses are managing their financial affairs.

Treasurer Scott Morrison said of fintech in 2016:

“It has the power to completely bring in a new environment of competition. For small businesses out there who find it difficult to attract capital, for large government agencies who are struggling with convoluted and difficult payment systems … to medium-sized businesses that are trying to bring their products up to date and to connect with their consumers in ways they haven’t before."

Then on his visit to a G20 Conference on digitising finance and financial inclusion in Germany on 27 January 2017, he was even more effusive in showing his passion for fintech:

"Fintech is the way of the future. There is, without doubt, a paradigm shift taking place. But while we cannot go backwards, the success of fintech is not guaranteed. It is important that all of us work together, across borders, to help build this industry so that it can deliver for consumers, for businesses and for our respective economies. That is what this moment, this opportunity, demands of us."

The advantages of digital wallets

Payment systems such as PayPal, and digital ‘cryptocurrencies’ like Bitcoin, enable anyone to do business without involving a bank, cutting out the fees, delays, and restrictions imposed by traditional financial institutions, and enabling truly global commerce.

Digital payments stimulate sales because they make it fast and convenient for consumers to purchase goods or services, which is why many businesses across every sector now accept them as an alternative to credit card payments and direct bank deposits.

One of the greatest advantages to digital payments is that they facilitate one-tap, on-the-go transactions via mobile device, enabling businesses to capture prospects at the moment of impulse and immediately convert them to customers. With 79% of Australians now owning a smartphone (and collectively looking at them 440 million times a day), mobile commerce is a channel no modern business can afford to ignore.

Blockchain is going mainstream

Blockchain is a database or ‘public ledger’ originally developed by Bitcoin as a way of verifying transactions but it’s rapidly being adapted to other purposes and it’s even being heralded as a technological revolution.

Blockchain allows people or businesses to transfer any item of value – from intellectual property to money or physical assets – instantly and securely, without the need for a bank or other trusted third party.

Offering security over personal information and transparency over the actual transaction, blockchain technology is already being adopted by financial giants like JP Morgan, with global consultancies such as PwC developing capabilities to help businesses across the world tap into its potential.

Crowdsourced funding platforms

Crowdsourced funding operates in two main areas: equity-based investing and peer-to-peer lending.

Crowdfunding platforms facilitating both types of funding are edging out the banks as the first port of call for businesses looking to raise finance, for three main reasons:

  • Speed – crowdsource funding platforms tend to be more agile and fast-moving when assessing applications
  • Accessibility – for growing businesses that don’t meet the conservative criteria of banks or venture capitalists, crowdfunding provides an opportunity to access cash from investors with broader appetite for risk
  • Cost – established businesses can benefit from cutting out the time and costs involved in traditional equity raising campaigns, and sharing some of the savings with investors.

Alternative lending in Australia

There are more than two million small businesses in Australia, and more than half of them have some form of debt facility. Borrowing is one route for small businesses to upscale performance or expand into new markets.

The cash injection from a business loan allows businesses to take advantage of too-good-to-miss opportunities, like the chance to buy out a supplier or competitor, or buy equipment or inventory.

Bear in mind these three fundamental principles:

- The type and term of finance must match the business need

Long-term needs, like buying property, need to be matched with long-term financing like a mortgage or term loan, to avoid needing finance again when the loan matures. On the other hand, fluctuations in working capital should be covered with a flexible form of short-term financing, like an overdraft or business credit card.

- Keep the cash flowing

Running out of cash is the number one reason small businesses fail. A profitable business can be brought to its knees by late-paying clients or seasonal fluctuations, so it’s essential to have funds available when needed. But flexibility comes at a price, as at-call financing can be more expensive.

- The higher the risk, the more the cost

There are many different types, terms and structures of business financing, but one simple rule underlies them all: the bigger the risk, the more the loan will cost. Offering collateral can give rise to lower rates than on an unsecured loan. Super-risky financing options like Merchant Cash Advances can attract interest rates of up to 200% per annum because the lender has no recourse if sales are insufficient to repay the advance.

Instant bank transfers in 2017

The New Payments Platform (otherwise known as instant bank transfers) will go live in 2017 making Australia one of only three countries worldwide that do this (along with Sweden and Mexico).

As reported in the Sydney Morning Herald here are the key features that will be switched on:

  1. 24/7, 365 day instant transfers (no weekend or public holiday delays).
  2. New ‘Identifier’ technology that eliminates the need to know someone’s BSB or account number.
  3. The possibility for new payment apps and an overhaul of the direct debit system.
  4. Multiple payments for complex purchases (like buying a new car) can be synchronised simultaneously, including insurance payments for example.
  5. Changing financial service arrangements will be a lot easier as the ‘Identifier’ technology will remove the need to update direct debit authorities.

Check the official New Payments Platform site for more information.

A business that is profitable on paper can still end up bankrupt if the cash doesn’t come in on time to pay the bills. The alternative finance market can help with accessible finance options to small businesses.

“The speed of your success is limited only by your dedication and what you're willing to sacrifice” - Nathan W. Morris

 

Mary Paterson is a freelance journalist who writes about small business finance from personal experience.


 

Leave a Comment:

RELATED ARTICLES

Five ways to filter the fintech hype

banner

Most viewed in recent weeks

Raising the GST to 15%

Treasurer Jim Chalmers aims to tackle tax reform but faces challenges. Previous reviews struggled due to political sensitivities, highlighting the need for comprehensive and politically feasible change.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

The rubbery numbers behind super tax concessions

In selling the super tax, Labor has repeated Treasury claims of there being $50 billion in super tax concessions annually, mostly flowing to high-income earners. This figure is vastly overstated.

Latest Updates

Investment strategies

Trump's US dollar assault is fuelling CBA's rise

Australian-based investors have been perplexed by the steep rise in CBA's share price But it's becoming clear that US funds are buying into our largest bank as a hedge against potential QE and further falls in the US dollar.

Investment strategies

With markets near record highs, here's what you should do with your portfolio

Markets have weathered geopolitical turmoil, hitting near record highs. Investors face tough decisions on valuations, asset concentration, and strategic portfolio rebalancing for risk control and future returns.

Property

Soaring house prices may be locking people into marriages

Soaring house prices are deepening Australia's cost of living crisis - and possibly distorting marriage decisions. New research links unexpected price changes to whether couples separate or silently struggle together.

Investment strategies

Google is facing 'the innovator's dilemma'

Artificial intelligence is forcing Google to rethink search - and its future. As usage shifts and rivals close in, will it adapt in time, or become a cautionary tale of disrupted disruptors?

Investment strategies

Study supports what many suspected about passive investing

The surge in passive investing doesn’t just mirror the market—it shapes it, often amplifying the rise of the largest firms and creating new risks and opportunities. For investors, understanding these effects is essential.

Property

Should we dump stamp duties for land taxes?

Economists have long flagged the idea of swapping property taxes for land taxes for fairness and equity reasons. This looks at why what seems fairer may not deliver the outcomes that we expect.

Investing

Being human means being a bad investor

Many of the behaviours that have made humans such a successful species also make it difficult for us to be good, long-term investors. The key to better decision making is to understand what makes us human and adapt.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.