Society is increasingly experiencing technological innovations that affect our daily lives. Think for example of all the online (ordering) possibilities, social media, robotization in production processes, digitization of administrations, etc.
Such technological innovations have also significantly impacted the way business finance is structured, creating both opportunities and challenges (for entrepreneurs and financiers). Five (not exhaustive) of these influences have been mentioned in this expert contribution:
1. Access to finance:
Opportunities: Technological innovations have enabled alternative sources of financing, such as crowdfunding, peer-to-peer lending and online lending platforms. This opens new opportunities for businesses to obtain financing without depending on traditional banks.
Challenges: While there is more access to financing, it also means more different forms and complexity of financing, which may cause entrepreneurs to "lose sight of the forest for the trees.
2. Data analytics and risk management:
Opportunities: Advanced data analytics and AI enable financial institutions to more accurately assess credit risk. This can lead to more personalized loans and better terms for businesses.
Challenges: Entrepreneurs and financiers must be aware of privacy and ethical considerations when using advanced analytics tools. In addition, it is essential to ensure the reliability of the data used.
3. Fintech developments:
Opportunities: Fintech businesses have introduced innovative solutions for payment processing, billing, accounting and other financial processes. This can help businesses manage their financial operations more efficiently.
Challenges: Traditional financial institutions must compete with fintech businesses and possibly adjust their service offerings and infrastructure to remain relevant.
4. Faster decision-making:
Opportunity: Technological innovations allow financial decisions to be made faster. This is particularly important in dynamic business environments.
Challenges: Faster decision-making also requires more attention to risk management to ensure that decisions are made based on real-time (reliable) data.
5. Digital payments and currencies:
Opportunities: Digital payments and cryptocurrencies facilitate international transactions and reduce reliance on traditional currencies. This can promote international trade.
Challenges: The volatility of cryptocurrencies and the laws and regulations surrounding cryptocurrencies present challenges for businesses looking to embrace these technologies.
It is important for entrepreneurs to adapt to these technological changes and develop a strategy that addresses both opportunities and challenges. Understanding the impact of technological innovations on business finance is critical to maintaining competitive advantage and achieving sustainable success.
