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Why Adapting to Current Banking Trends is Necessary

  • Banking and related financial service are becoming increasingly digital
  • This shift presents major opportunities and advantages for small businesses, but also poses significant risks, including concerns relating to cyber-crimes
  • Businesses must nevertheless evolve and adapt with the trend towards an increasingly digital  economy, or they will go bust

Financial services such as banking, insurance and accounting are becoming ever more digital in nature, and according to the United Nations Digital Financing Task Force, this heralds a “historic opportunity to reshape finance”, could have a potentially “transformative impact by empowering people as savers, lenders, borrowers, investors, and taxpayers”.

Businesses need to adapt to the paradigm shift towards digital financial services, not only to survive in the market, but also to fully benefit from the emerging opportunities that this shift makes possible. 

One of the major opportunities for small businesses and startups presented by the move towards digital finance is that they can perform many of their own banking, accounting, and other financial functions, at any time and from any place. This greatly increases a business’ autonomy, and its operational efficiency and flexibility, while making purchasing more convenient for consumers. The shift towards digital banking (and related financial services) also poses risks for businesses both large and small. One of the most significant risks relates to cyber-security – an issue that no business can afford to ignore. 

Let’s look more closely at three of the paradigm-shifting banking trends that small businesses and startups must evolve with and capitalise on:

  1. 1. Digital consumer payment systems 

Cash is rapidly declining as a means of consumer payment, as growing numbers of consumers begin to make use of digital payment systems for a wider range of purchases. The Harvard Business Review indicates that roughly 75% of US consumers used some form of cashless payment system in 2020. While a fully cashless society is not anticipated in the near future, it is still vital that businesses respond effectively to this fundamental change in the way people pay for products and services. 

PayPal is by far the most common digital payment system used by small businesses. Other widely used systems include Google Pay, Apple Pay, Venmo, and Square. Small companies have to strategically integrate cashless payment systems into their businesses, if they are to survive and remain competitive in their industry. 

  1. 2. Accounting Software

The shift among small businesses towards digital banking and cashless consumer payment systems is unfolding in concert with a growing move towards the use of accounting software. The Really Useful Information Company (TRUiC) emphasizes on this website that small businesses need to capitalise on the opportunities made possible by emerging accounting software. 

Any small business accounting software you purchase should be able to manage inventory, reconcile credit card and bank transactions, account for taxes (e.g., sales tax), use double-entry accounting standards (i.e., simultaneous income and cost tracking), and handle everything else you require. 

TRUiC observes that accounting software programs such as FreshBooks enables small businesses to take greater control of their own financial accounting processes, while also making their accounting processes more streamlined, and amenable to constant monitoring and updating of relevant inventory, revenue, costs and other relevant business data. 

  1. 3. Cyber-security 

The trend towards digital payment systems and accounting software both raise questions pertaining to cyber-security. According to the FBI’s Internet Crime Report, cyber-crimes cost the US economy  $2.7 billion in 2020 This is a concern that all businesses, including smaller companies, need to develop clear strategies and plans of action in order to adapt effectively to risks posed by shifts towards digital banking, accounting and related financial services. 

The importance of basic cyber-security measures remain critical, especially for smaller businesses that cannot afford dedicated cyber-security teams. Among the most effective measures that small businesses can take to minimize the risks associated with cyber-crime are:

  • robust and regular training of employees,
  • using effective, routinely updated anti-virus software,
  • ensuring secure network systems,
  • use of multi-factor authentication,
  • strict regulation of physical access to computer systems.
  1. Evolving with the times

The trend towards digital banking and related financial services presents significant opportunities for smaller businesses, if they are able to adapt effectively to this shift. While the fundamental principles of business have not changed, success in today’s economy also depends increasingly on the ability to integrate digital tools such as cashless consumer payment systems, and accounting and cyber-security software.