It really doesn’t matter what type of business you run, at the end of the day the last thing you feel like dealing with is your financial affairs. However, you know you must, as we’ve drilled into your heads over the years. I have an MBA in Finance and crunching numbers at the end of each day is not my idea of fun.
Enter artificial intelligence (AI). Yes, you know a lot about it, but it has yet to come to your finance department, which is usually you. We have heard for some time now that the bean counters and others in financial realms will be replaced by algorithms that will perform much better. Accounting, banking and insurance will all feel the sting of mechanized replacement. We have come a long way from cash registers, to spreadsheets to QuickBooks, but it all is still a hassle.
Do not fear, the days of creating reports on the back of napkins are over. A new financial ecosystem for small business owners is being built that is customized, intelligent and real-time. Harvard’s Karen Mill published an informative book entitled Fintech, Small Business & the American Dream: How Technology Is Transforming Lending and Shaping a New Era of Small Business Opportunity.
She gives the utopian example of a coffee shop owner who had all the information she needed to run her business at her fingertips. There would be an intuitive dashboard that not only helps her run her coffee shop, but makes financial decisions and takes the pain out of managing business finances. Effective sales forecasting is high on the small business AI hit list.
It mainly comes down to data. Fintech is getting better at gathering and analyzing data and then presenting it in useful ways. So the natural players providing financial services to small businesses will be the big platforms and payment portals. According to deBanked the five largest online small business lenders in 2018 were (in order) PayPal, OnDeck, Kabbage, Square Capital and Amazon. This allows big tech companies to gain insight into the day to day revenue fluctuations of their small business customers.
One would imagine that the accounting software companies would also be a perfect provider of AI financial services. Companies like Intuit, Xero, NetSuite and FreshBooks arguably have even better insight into small business than the likes of PayPal, Square or Amazon. They see everything both on the revenue and expense side as well as the cash flow and balance sheet. Not only that, when you have a large market share you see the connections between companies and you can notice problems in real-time.
It is an exciting time to be involved in fintech as new ecosystems are being built before our eyes. But it’s not here yet. On the journey towards small business utopia, we are probably only in the second or possibly the third inning. While lenders like banks have the data that will be necessary to take financial AI to the next level, it will probably come first from fintech in various forms, as they have the ability to manipulate the data in ways that will be far more advanced than traditional lenders.