Technology and innovation are transforming many sectors of our economy. It is incumbent on policymakers, the administration and industry to marry these innovations with transparency and consumer protections to foster strong economic growth and spur small business growth.
In today’s economic environment, small businesses urgently need new sources of capital to fund operations, build inventories, meet payroll and bridge the gaps between the time they bill and the time they are paid. Yet it is becoming increasing difficult for too many entrepreneurs to borrow this money to support their businesses.
The solution: Innovation in financial services, coupled with an acceptance of the new financial services industry, updated financial regulations and consumer protections. This is essential to get small businesses the money they need to succeed.
The word “fintech” originally defined the technology sector participating in financial services. Today it has evolved, and now describes a new industry where both financial services and technology companies work together to deliver financial services products.
The technology evolution came quickly. Basic financial services that once required paper check-writing or visits to a bank can now be done online, or in the palm of your hand. Traditional lending historically demanded voluminous paper documents from small and large businesses alike. Today, lenders can electronically and nearly instantaneously access business financial records, dramatically shortening the time from application to approval. Moreover, innovative financial services, as well as crowdfunding – where anyone can contribute to a cause or fund a project online – and peer-to-peer lending platforms, are emerging online, providing new channels of access to credit and capital.
Regulation, however, has not kept pace. Today’s small businesses are stifled by financial services rules and regulations designed for the past. This patchwork of outmoded state and federal laws and regulations requires financial services companies, including technology firms, to comply with outdated requirements of the past, even if those laws or regulations do not directly apply to the online environment or to the specific services that company offers.
This need for regulation that recognizes innovation and new technologies must be balanced with essential consumer protections. Regardless of form or size, all companies that offer financial services must adhere to appropriate consumer protection standards and be transparent in their terms and offerings. Borrowers, whether consumers or small businesses, need to know how they will be protected when obtaining this financing.
Intuit’s online lending platform is an example of that protection. It helps match our small business QuickBooks customers with both traditional and innovative lending platforms in a transparent and consumer-safe manner. Matchmaking platforms such as this can allow small business owners to use their existing business financial information, as well as their QuickBooks data, to help streamline and automate the approval process. Pre-populating the applications saves time, reduces paperwork while providing data that gives a lender the full picture of the small business. It also boosts productivity, giving entrepreneurs more time to run their small business.
Customer protection is paramount in the process. We provide transparent terms throughout the process, and perform quarterly audits of our partners, requiring them to abide by certain annual percentage rates and disclosures.
Recent progress, both in the executive branch and in the Congress, indicates that financial regulatory reform is on the way. By working together with both the financial services and technology industries on principle-based regulation, policymakers can close the gap between yesterday’s policies and today’s realities. Creating consumer-safe and transparent fintech solutions in an online environment will help to ensure that small businesses across the country continue to achieve the American Dream.