How can Fintechs help SMEs become sustainable businesses

Autor: Andreea Porojan
Timp de citit: 3 minute

In today’s rapidly evolving financial landscape, fintechs (financial technology firms) stand out as dynamic disruptors that blend technology and finance in innovative ways.

They’ve redefined traditional financial processes, offering quick, user-friendly, and cost-effective solutions to both individual users and businesses. Among the beneficiaries of these advancements are Small and Medium-sized Enterprises (SMEs), which represent a significant proportion of businesses worldwide.

A recent McKinsey report found that reaching net zero by 2050 could entail a 60 percent increase in capital spending on physical assets, compared with current levels. The required investments amount to $9.2 trillion per year until 2050, of which $6.5 trillion annually would go into low-emissions assets and enabling infrastructure.

Building green businesses is top of mind for many leaders. In Leap by McKinsey’s state of new-business building report, 92% of executives say that new businesses built in the next five years will address sustainability to some extent—and 42% expect to put sustainability at the center of their new businesses’ value proposition.

In the context of sustainability, fintechs play a pivotal role in assisting SMEs in enhancing their sustainability practices. Here’s how:

Educational Resources: Sustainability is as much about knowledge as it is about action. Fintech platforms often provide educational resources, webinars, and workshops to SMEs about the importance of sustainability and how to integrate sustainable practices into their business operations.

Efficiency through Digitalization: Fintech solutions can significantly reduce the need for physical paperwork, office space, and travel, thereby reducing the carbon footprint. Digital-only banks, e-invoicing, and blockchain solutions ensure seamless, eco-friendly transactions.

Data Analytics and insights: Advanced data analytics provided by fintech platforms can empower SMEs with insights into their operations. By analyzing this data, businesses can identify areas where resources are wasted and implement strategies to become more energy-efficient and reduce waste.

Supply Chain transparency: Blockchain, a prominent fintech tool, offers complete transparency in the supply chain, enabling SMEs to ensure they’re sourcing materials from sustainable suppliers. This not only promotes sustainable sourcing but also encourages other businesses in the chain to adopt eco-friendly practices.

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Sustainable Investment Platforms: Fintechs are also pioneering in offering platforms where SMEs can invest their earnings in sustainable projects or assets, ensuring their money contributes towards a greener future. Business Insider made a list of The Best Socially Responsible Investing Apps, here.

Payment innovations: The adoption of digital payments and electronic wallets by SMEs reduces the need for physical cash handling, transportation, and associated environmental impacts. This transition not only reduces costs but also indirectly promotes sustainability.

Facilitating access to Green Financing: Many SMEs are willing to adopt sustainable business practices but are often constrained by limited finances. Fintech platforms can offer tailored financing options for SMEs aiming to undertake green projects, such as installing renewable energy sources or transitioning to eco-friendly production processes. Platforms like crowdfunding and peer-to-peer lending can help SMEs secure necessary funds.

Encouraging Circular Economy: Some fintech platforms are designed to promote a circular economy, where products and materials are reused and recycled, reducing waste. They connect businesses that have excess materials with those that need them, fostering an environment of resource sharing and sustainability.

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Carbon footprint tracking: Certain fintech tools allow SMEs to monitor and calculate their carbon footprint, offering them a clear picture of their environmental impact. These platforms can then suggest actionable steps to reduce this footprint, aligning business operations with global sustainability goals.

Promoting financial inclusion: By offering financial services to previously underserved or unbanked populations, fintechs ensure that more people and businesses can access financial tools, leading to more inclusive economic growth. Inclusive growth is a cornerstone of sustainable development.

In conclusion, as the world grapples with environmental challenges, it becomes crucial for businesses, regardless of size, to adopt sustainable practices. Fintechs, with their innovative tools and solutions, are uniquely positioned to guide SMEs in this endeavor, ensuring that these businesses not only thrive economically but also contribute positively to a more sustainable future.