5 minute read 16 Nov 2021
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Why enhancing the finance function is key for FinTech success

By Tom Bull

EY UK FinTech Growth Leader

Technology-focused. Facilitator of innovation. Travel enthusiast.

5 minute read 16 Nov 2021

For any high-growth or ambitious FinTech, an enhanced finance function is a necessity, not a luxury. 

Two questions to ask
  • Why and when do FinTechs need to upgrade their finance function?
  • What are the benefits and the implementation challenges of upgrading your finance function? 

Every FinTech has its own definition of success, whether it be in terms of its geographic reach and product range, its client base, or even its proximity to exiting the business through a buyout or public listing. Core to all these goals is a modern, technology-enabled finance function. Such a function must allow the company to seamlessly manage cross-border activity and readily incorporate new products, as well as enable high-quality reporting that meets the standards of clients, investors and regulators. The finance function must also be able to instantly analyze the numbers and produce real insights that help the CFO be a key strategic voice.

There are stages in the journey of a FinTech when its current finance function is no longer fit for purpose and its finance systems are outgrown. In reality, such change becomes an imperative much sooner than most high-growth FinTechs realize.

The importance of why and when to upgrade the finance function

There are milestones that require a step change in the sophistication and level of finance support for FinTechs as they scale up, such as:

  • Operating in a new country, with new accounting rules to accommodate new currencies in which to report and new legal entities to consolidate
  • Winning a large client that may demand sophisticated financial information from its FinTech suppliers as part of its third-party risk management activity
  • Investors increasingly asking for more extensive information, such as the margin of different products to different customers
  • Increasing expectations from regulators and auditors
  • Preparing for an IPO or direct listing, with demands for comprehensive financial information to be produced quickly and accurately, as well as evidence of robust financial controls

Often, many of these factors hit simultaneously, and firms face a “tipping point” where they have to pivot to a finance function that matches their growth or aspirations. It is key for any aspirational FinTech to have a roadmap of how its finance function needs to evolve as it keeps growing.

The good news is that companies can often deploy available cloud-based solutions in a few weeks. For those worried about the cost of new IT infrastructure, many solutions are software as a service (SaaS) and so have minimal IT spend and are easily scalable – ideal for FinTech and high-growth firms. As per Andy Hirst, VP of Financial Services, EMEA North, SAP SE, we have seen firsthand the impact a better structured and technology-enabled finance function has on productivity and in helping CFOs orchestrate the next stage of growth.

We have seen firsthand the impact a better structured and technology-enabled finance function has on productivity and in helping CFOs orchestrate the next stage of growth.
Andy Hirst
VP of Financial Services, EMEA North, SAP SE

Benefits: a finance team is central to growth

1) The same but different

The obvious benefit to implementing cloud-based solutions is that accounting and reporting becomes a largely automated, straight-through process. Companies can produce key reports and analysis with significantly less manual work and with greater accuracy and cost-efficiency. FinTech becomes better integrated with front- and back-office platforms, avoiding duplication of work and strengthening control, as workers no longer need manual interventions to assemble, correct and reconcile financial data.

This faster, enhanced approach moves the finance function from just a reporting function to an integral cog in the success of a FinTech – for example, being able to produce decision-ready insights to help develop products, markets and customers, and improve financial resources, such as cash and capital.

2) Transforming finance to the heart of decision-making

A modern, comprehensive, finance system supports the art of the possible, as it allows the finance team to specialize in data-led insights that have real commercial value. It brings a wealth of new tools to the CFO, enabling financial planning and forecasting to directly influence the operating model. It can move the finance function to the heart of decision-making through increased influence in the following areas:

  • Cost: Keeping the cost base down, running finance services more efficiently and providing insights to the rest of the business to enable better cost management
  • Control: Improved delivery of accurate, timely, consistent reporting and data to both internal and external stakeholders
  • Cognition: Enhanced ability to analyze business data and derive insight to support strategic and business decision-making
  • Compliance: Efficiently and consistently responding to regulatory requirements, quickly codifying changes in regulations and helping ensure compliance with accounting policies and multi-jurisdiction regulation

The importance of these areas may vary depending on maturity. Fortunately, online-based finance systems are designed to grow with the business, scaling up as needed.

Challenge of implementation

Moving to a more comprehensive finance system brings a particular challenge for FinTechs: the cultural change needed. It requires a different skillset and attitude than “just getting the numbers right.” Automation mainly takes care of the basic numbers and reconciliation, while the people working with such systems add value through analysis and sharing of insights. Helping ensure the finance team is skilled to get the best from an enhanced finance proposition is key.

The silver lining is that FinTechs are, by nature, agile and free of legacy IT systems, so moving to a new, improved approach should be much easier than it would be for larger organizations.

Core to success

In the same way companies quickly outgrow their initial premises, the finance function can become a hinderance as FinTechs make key growth decisions. Yet, ironically, this is when the finance function is potentially most valuable. Internally, it can provide the right insights for action; and externally, it offers credibility and trust in the numbers. A better organized, structured finance function shows the outside world that the business is well managed, which is vital as firms look to raise capital or float.

The benefits can outweigh any disruption or cost for a high-growth FinTech. To recap, these include:

  • Better productivity through automating finance processes – cheaper, faster and more accurate
  • More informed decision-making, allowing the CFO to do more than just reporting
  • Meeting the expectations of customers, regulators and investors
  • Maximizing valuations, through enhanced trust, credibility and better decision-making

Richard S Jones, CFO Technology Leader for FinTechs, Ernst & Young LLP, Bob Sherlock, Financial Services Consulting Director, Ernst & Young LLP and Andy Hirst, VP of Financial Services, EMEA North, SAP SE contributed to this article.

The FinTech Playbook: Structuring for scale

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FinTechs become successful by having a relentless and focused approach to winning – through attracting new investment and clients or developing technology and products. In the same way as working out of a garage is sustainable only for a short time, an early-stage finance structure quickly becomes limiting for any fast-growing FinTech. 

About this article

By Tom Bull

EY UK FinTech Growth Leader

Technology-focused. Facilitator of innovation. Travel enthusiast.