With the evolution of financial service technologies, businesses are now able to do business in more efficient ways without having to rely on traditional banks. Financial services being a crucial part of many business operations, many other ways have emerged to help businesses to grow without the bureaucracy associated with traditional banks. Some of these ways include:
Peer to peer lending systems
A peer to peer lending system works by making matches between lenders and borrowers directly. This is achieved using a service like LendingClub.com to provide the infrastructure necessary for such transactions. Rates depend on the length, amount and loan security. Businesses can also invest their money for reasonable interest rates. To maximise returns, consider lending directly to the P2P provider.
Use of Cryptocurrencies
This is a new way to spend, manage, and invest money, through use of digital currencies which rely on blockchain technologies. Blockchain allows safe and secure trading, eliminating the middleman formerly needed to facilitate or manage the transactions. One of the most popular cryptocurrencies today is Bitcoin.
Bitcoin blockchain is a single database massively distributed and replicated, without any central coordinating point. It lowers cost and as a multi-currency payment mechanism is faster, more secure and straightforward to use. The system uses safe wallets managed by users, and a distributed ledger controlled by the bitcoin blockchain.
From the customer’s view, the system is open, and as there is no central authority necessary, hence, no fees associated with intermediaries. Many businesses today are accepting bitcoin as payment.
Open banking methods
This is a connected ecosystem for financial and non-financial services with multiple underlying service providers. With this platform, businesses receive state-of-the-art products without being limited by the account relationships. Customers have the flexibility that they require and a unified-interoperable-interface.
With the tedious process of banks having to evaluate their client’s activities to ascertain trust, crowdfunding eliminates that process by relying on digital reputation to offer or fund businesses. This has made it more convenient for businesses to access money with low-interest rates, refinance or borrow instantly via their mobile phones, thus, empowering users with information on their financial well-being.
Some of the benefits attested by businesses using these various methods of working without traditional banks include:
- Save money as no transaction fees are required as compared to traditional banking systems which need to charge some amount for processing your payments. Cryptocurrencies do not require a bank to verify your transaction again saving you on time.
- Unlike traditional banks where you have to queue, blockchain technology has enabled businesses to process their money more quickly using cryptocurrencies like bitcoin.
- Businesses have been allowed to trade globally without having to attach themselves with governments, transacting foreign currencies in a much faster way and more transparent exchange rates.
- The ability of cryptocurrencies to fluctuate in value has offered many investors and businesses an investment opportunity. Some of them like bitcoin has recently become more stable building trust among investors.
- Access to 24/7 customer service enabling them to get instant feedback and cultivate more informed financial decisions.
- Businesses can secure their financial records more accurately and privately.
- Enhanced data security from peer-to-peer lending systems.