Merchants have become more efficient with their customer's payment experience through digital innovation. Businesses have seen a rise in their competitiveness and increased customer volume thanks to FinTech's advanced technology systems that simplify billing and money collection. Randall Castillo Ortega, the founder of SME backer RACO Investment, shares how businesses can benefit from them to reduce banking costs.

Castillo says that FinTechs provide many benefits to the market, including reduced bank paperwork, faster approvals, payments confirmations, ease of implementation and affordability for a larger user base. “Transparency in the operation of these entities is important to ensure a better customer experience and higher return on investment for businesses who offer their services,” he adds.

The high cost of commissions is one of the major obstacles to bank penetration in different countries. Fenalco, Colombia, reports that the dataphone payment rate is 4.2%. Although there has been a decline in recent years, commissions can vary depending on the size and increase by as much as 10%.

This charge is 0.8% in Spain and other countries, which demonstrates the high costs of banking in a country like Colombia. Jorge Rodriguez, director at MasterCard Advisors for Latin America and the Caribbean, said that only 10% are made using cards in Colombia. This is because of the difficulties businesses face when implementing this method of payment.

Businesses must also pay charges for tools like the dataphone. Businesses that choose to finance their operations must often assume the high costs of payment. Castillo adds, “FinTechs can also be a key ally in reducing operational costs related portfolio recovery and collection. FinTechs are a technology-based platform that streamlines business financing operations. They also take away traditional funding and fund management methods.”

FinTechs have made existing borrowing-lending systems more efficient. Many companies no longer need a whole portfolio team to handle the payment of the financed purchase. FinTechs provide customers with external financing, which means that they are the ones responsible for collecting the money. This relieves merchants of the burden.

Digital wallets are a service that can be used to finance financing, and it is one that stands out among FinTechs. They are useful in reducing costs and simplifying existing processes. This results in lower costs than traditional banks. The processes are also faster and more automated, which increases the efficiency of payments to businesses.

In Latin America, on average, the portfolio of consumer credit and loans for purchase of goods and/or services increased 11.54% to $155.4 trillion by the end of 2013. These numbers show consumers' acceptance of credit. It is also a relief for companies that FinTechs handle the collection and financing tasks. They use non-traditional methods to assess credit risk and determine the interest rate of loans.

Castillo suggests that consumers financing, which is performed by an expert third party like a FinTech, allows retailers to close more sales by giving their customers the option of paying in installments or with lower interest rates.

FinTechs can offer customers very low interest rates when compared to other payment methods. They offer loans at very low interest rates, with no hidden fees or handling fees. Customers can cancel the loan anytime they want or make early payments.

FinTechs are able to offer payment solutions that are simpler, quicker, and more secure for customers, either at the point of sale or via eCommerce. It also offers merchants economic benefits, such as savings on operating costs and bank payments. However, they also have competitive advantages and can offer customers flexible and attractive payment options.

About RACO Investment

RACO Investment is a financial investment firm serving small- and medium-sized companies in Panama and Costa Rica. It was founded by Randall Castillo Ortega, an expert financial adviser who has his roots in the import and export industry in Latin America. The firm has helped numerous startups find the financial support they needed to get off the ground. It has also contributed bridge loans to assist those looking to restructure or improve their operations.

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