Traditionally, finance has always been a bit complicated. Whether you were applying for a mortgage or business loan or filling out your tax return, there have always been endless forms to fill in and confusing jargon to contend with.
But, in the past few years, a number of companies have realised that many people are fed up with the old approach, and are creating better ways to do things. They’re grabbing attention and making people’s lives easier by finding new ways to teach people about finance, whether by offering quick and straightforward mortgage applications or taking the pain out of tax time.
For new businesses launching this year, there’s a tremendous opportunity to join this innovative sector.
Deloitte research has found that the UK is home to approximately 2,500 fintechs (financial technology companies) – identifying London as one the leading fintech hubs worldwide. Is there room for more among this throng? Absolutely – especially if you’re launching a fintech that focuses on simplifying and streamlining complex financial topics.
To give you inspiration, we’re going to take a closer look at this “finance made easy” sector, focusing on the following areas:
Financial education – new ways to learn about what you can do with your money
First of all, the bad news: the Organisation for Economic Co-operation and Development has found that the UK is below average when it comes to overall financial understanding – way behind the likes of France, Norway, Finland and Canada.
As for the good news? This presents a terrific opportunity for new startups who are laser-focused on simplifying complex financial matters for their customers.
There are already some intriguing startups that are trying to address the issue by targeting specific groups.
For example, Juno wants to help improve female financial literacy and therefore help democratise investing. To do this, it’s aping the approach of world-conquering language learning app DuoLingo and combining info cards and short videos with quizzes and progress trackers to make sure the information really sticks.
Others are taking a different tack. Claro Money wants to make personalised financial guidance accessible to far more people than the 8% of the population that currently use regulated financial advice.
To do this, it’s launching what it calls the “UK’s first financial coaching app”, which includes free educational content, financial tools like ISAs, and the ability to book 1:1 video chat sessions for financial coaching.
This service doesn’t provide regulated financial advice, to be clear. But it does allow people investing more modest sums to get general advice in an easily approachable format, and to get insight into the best ways to think about money.
Claro Money COO Sushant Chalipat says that the aim is to “help all users develop a smart money mindset so they can achieve their goals,” and points out that financial literacy is a particular problem for younger adults.
Indeed, the Claro Money Mental Health Report found that the average financial literacy score for 18-34 year olds was 16.5% below the UK average.
More broadly, Chalipat underlined the opportunities in the sector, arguing that new technologies like Open Banking and cloud computing have made it far more accessible and that the COVID-19 pandemic has “boosted the desire for financial products because many people faced financial hardship for the first time”.
Finally, he has three key pieces of advice for anyone looking to enter this area:
- Find your niche – “Consumers are looking for targeted solutions for specific problems, so focusing on one issue gives the best chance of attracting them.”
- Look to the East for inspiration – “China, India and Singapore have some of the latest fintech startups with access to billions of customers, and are leading the way on embedded finance (the combination of financial and non-financial products).”
- Focus on user experience – “Good intuitive design is a basic requirement, not a luxury, and enables customers to have a good experience and easily access your services.”
Financial education business ideas
Develop a financial education mobile app
This is the most natural route to go down, and you can even outsource the coding if you don’t have the technical skills. The key is being able to approach what can often be a pretty dry subject in a way that brings it to life and really illustrates the impact that different financial decisions can have.
Interactivity is also hugely important, so like Juno, make sure to include games and quizzes that engage the user and give an immersive learning experience.
Mortgage services – making home buying easier
As anyone who’s ever done it will tell you, buying a house can be incredibly stressful. You need to coordinate viewings, deal with estate agents, fork out for all sorts of fees and, last but by no means least, get a mortgage.
All of this involves completing lots of forms with financial and personal details so the lender can decide if you’re eligible, how much they’ll lend you, and what rate they should charge you.
It’s a complex and at times emotionally gruelling process that is ripe for disruption by new business starters.
Digital mortgage broker and lender Habito, for example, is on a mission to shake all this up. It aims to make getting a mortgage a quick and straightforward process. Founded in 2015, the company has rapidly gone from fledgling startup to TV ad household name, earning two entries in the Startups 100 (including No. 12 in 2018) along the way.
Its success makes it a great example for the finance-made-easy playbook, and a great inspiration for anyone considering starting a business in this sector.
If you’re looking for inspo for your own startup, you could do worse than spending some time on Habito’s brilliantly laid-out website. All complex terms are explained in plain English, and the online form works out who you should be directed to through a series of simple questions.
All companies in this sector should put the customer first, and this ethos runs through Habito’s whole mortgage process. After the online form is completed, Habito gets in touch with the customer and runs through their needs and circumstances on a phone call.
Because Habito makes its money by charging lenders commission, the service is free to customers – a pretty important way to make it feel even more accessible.
Other companies are tackling the arguably even more complicated issue of commercial mortgages.
For example, Glenhawk (No. 6 in the 2019 Startups 100 and also ranking in the 2020 edition) prides itself on acting ethically in an often unethical industry, and providing clear communication with its clients.
The rapidly growing challenger lender specialises in bridging loans – short-term finance that helps property developers to cover any cash flow issues during their operations (such as the gap between selling one property and buying another).
As a former property developer, founder Guy Harrington knows knows this market well. And like Habito, the impetus for Glenhawk was a feeling that the current system simply wasn’t working, and that there had to be a better way to go about things.
Mortgage services business ideas
Become a mortgage broker
Although it's gradually getting easier, there are still pretty significant obstacles blocking entry into this space (especially if you want to be a lender). A more straightforward way to get involved is to start a mortgage broker business.
There’s still some red tape involved here, but you don’t need huge sums to get started.
To stand out, it’s a good idea to target a specific area that is ripe for disruption.
One option could be commercial mortgages used to purchase business premises, an often confusing process where business owners could really do with a helping hand and clear guidance.
Business finance – new ways to fund SMEs
Once upon a time, there was only one way to get a business funded. Go to the bank, set out a detailed business case, cross your fingers and hope you got accepted for a loan.
Now though, as our 10 ways to fund your business (without a bank loan) guide explains, there are loads of options – including some that have only come to the UK in the past few years.
This is yet another sector that’s ripe for disruption. A business that offers new and simplified ways of gaining funding will be hugely welcome as the economy tentatively seeks to emerge from COVID.
A great example of this innovation is merchant cash advance, which started in the US but is now offered by several lenders across the country, including small business lending specialist Iwoca (no. 26 in the 2014 Startups 100). This allows card-based businesses to essentially borrow against their future payments, so they can get the funding they need for expansion and then pay it off flexibly (in either a few months or longer depending on how their business is performing).
It’s another option for businesses to consider, alongside more established alternatives like invoice finance and asset finance.
With so much choice out there (and hundreds of lenders), it’s no surprise that business finance comparison sites are flourishing. For example, Funding Options was founded back in 2011, but is still expanding rapidly and was named one of Europe’s 1,000 fastest-growing companies by the Financial Times earlier this year.
It uses clever AI tech to match companies and lenders, and covers a whole range of business finance options.
Funding Options is therefore well placed to discuss how business finance has changed in the last few years, and CEO Simon Cureton shared his thoughts on developments in the sector and the impact of COVID-19:
“The pandemic shone a blinding spotlight on the fragmentation within the SME finance market. As new variants continue to spread and new restrictions are put in place, the biggest challenge for small businesses will be gaining access to the vital funding they desperately need, quickly.
“Encouragingly, we have witnessed new lenders enter the SME finance sector during the pandemic, with compelling digital-first propositions. It is these innovative lenders, alongside the leading incumbent altfi players, that will continue to drive the revolution in SME lending and promote growth rather than survival.”
These new lenders include Uncapped, which has “taken advantage of the digitisation trend by using ecommerce data to drive its underwriting decisions”. Uncapped has targeted a specific sector – ecommerce/subscription companies with over six months of trading history that have at least €10,000 (£8.3k) in monthly revenue – and charges a flat fee with repayments varying in line with monthly revenues.
Another lender, Bank North, is innovating in a different way. It has a “specific regional focus, with a network of employees and partners who are spread across the UK, giving it a unique reach and wide appeal to businesses who are located in different regions”. With lending decisions made at a regional level, it’s in some ways a return to a previous model of customer service, but pairs this with a “super-fast cloud-native banking platform that underpins its competitive edge”.
Business finance business ideas
Start a business finance advice service
Now there are so many options out there, it can be pretty tricky for business owners to work out which option is the best fit for how they operate, especially with so much information put out by lenders themselves.
While comparison sites are definitely useful, there’s a gap for a more personal service that will guide people through the whole process, from consideration to application and final approval.
So, if you do know a thing or two about business finance, this could be a great avenue to consider.
Tax – easing the most stressful time of the business year
As a small business owner, tax time is never going to be fun. It can be a whole lot of form filling, only to see money leaving your pocket.
Over the years, the Self Assessment process has become easier. For most people, filing online is far quicker than filling out a paper tax return, and accounting software can really help people keep track of all their transactions without having to sort through an annoying paper trail.
What a lot of people really want, though, is something that just takes all the hassle away and does (almost) everything for them. This is a strong business opportunity for startups looking to make the tax return process accessible and clear.
Take the example of TaxScouts (no. 11 in this year’s Startups 100). This service is the ultimate example of “taxes made easy” – you simply pay a fixed fee of £119, get matched with an expert accountant, answer a few questions, and have your taxes filed.
If you need more help, then you can get a 1:1 45-minute video or phone tax advice call for £99, or receive help getting your company tax registered for £25.
TaxScouts co-founder and CEO Tram Abramov discusses how his company continues the trend of replacing high street businesses with simpler, more accessible and more affordable online alternatives:
“Tax feels like one of the last traditional industries to be disrupted. You can open an online bank account in a few clicks, but sorting your Self Assessment is still as painful as it was 15 years ago. That’s the problem we’re trying to solve with TaxScouts. Sorting your taxes should be easy, quick and affordable.
“But HMRC’s old systems and the expense of traditional accounting support prevent that from being the case. So we built our tax preparation service with this pain in mind, trying to tackle it for the 200 million Europeans that struggle through their taxes every year.”
Tax business ideas
Offering services to accountants
To thrive in this new landscape where the key is to be clear, transparent and user-friendly, accountants will need to move with the times and approach their business in a customer-first way.
Countless business owners will tell you that getting a good accountant makes things a million times easier. Despite this, accountants have a bit of an image problem, generally being perceived as dull people you wouldn’t want to spend five minutes with.
To help them combat this, you could specialise in accountant branding or website design, to ensure that their public faces chime with this new era of finance made easy.
Final thoughts
If you’ve got some know-how in this area, there’s never been a better time to start a new finance business.
Whether you want to help improve the country’s financial literacy, help people navigate the world of mortgages and make sense of the new business finance options, or even help accountants embrace new attitudes – these trailblazing startups have proven there’s a huge appetite for finance startups making things more straightforward.
And with a bit of planning, your business could be the next one to ride the finance made easy wave.
via https://www.AiUpNow.com
January 24, 2022 at 08:15AM by Alec Hawley, Khareem Sudlow
