Cloud-based ERP Implementation Breakdown for Fintech Startups

The Fintech business is expanding rapidly, fuelled by innovation and rising customer demand for quick, digital financial services. However, as fintech companies grow, maintaining complicated processes becomes increasingly difficult. This is where Enterprise Resource Planning (ERP) technologies come into play.

 

Why is a Cloud ERP System the Ideal Solution for Fintech Companies?

 

Despite their use of current technology to make their products more user-friendly, many financial companies still manage their back office activities manually. These processes are rife with human mistakes and data duplication.

 

The cloud enterprise resource planning (ERP) system is at the cutting edge of technology that enables firms to automate manual operations and provide operational efficiencies.If you extrapolate the term ERP, you will discover that it stands for Enterprise Resource Planning.

 

This is because ERP systems were originally built for product-centric firms such as manufacturers, wholesalers, and retailers, allowing them to more efficiently acquire and handle stock and supplies, as well as do accounting.

 

As fintech organisations develop and mature, they increasingly rely on ERP systems. ERP solutions give Fintechs with much of the structure, procedure, and operational capabilities required for growth. 

 

Also Read | Business Intelligence in ERP: Role and Benefits

 

Here's how a cloud ERP solution may aid fintech companies

 

The introduction of ERP (Enterprise Resource Planning) systems in the FinTech business is intimately related to the sector's rapid expansion and rising complexity of operations. As FinTech firms grow and scale their operations, the requirement for a single and efficient system to manage different business tasks becomes more urgent than ever. ERP systems have developed as a potent solution to these difficulties, offering a comprehensive platform that streamlines complex processes, improves operational efficiency, and provides real-time data for quick decision-making. 

 

Listed below are some of the ways ERP solutions can help fintech companies

 

1. Automating essential financial processes -

 

Manual data management using spreadsheets leads to human mistakes and data duplication. Mistakes like this can cause financial closure times to be delayed, have an impact on fintechs' financial position, and result in significant fines from regulatory agencies. This places the onus on fintechs to arm themselves with the best that cloud technology has to offer.

 

2. Multi-company Financial Consolidation -

 

Fintechs require cloud solutions that can provide a consolidated and global view of all their businesses and subsidiaries across multiple nations. Cloud ERP systems include worldwide financial management tools that provide visibility, as well as preset support for several currencies and languages.

 

3. Scalability - 

 

Fintech organisations operate in a sector that is now poised for growth. Unfortunately, traditional systems and other small-scale solutions are unable to accommodate fintech's often stratospheric growth rates.

 

4. 360-degree, real-time visibility -

 

Fintech enterprises frequently operate in disruptive and volatile financial markets. Fintechs' suite of best-in-class products might sometimes look like a mountainous stack. Often, these systems are not linked, do not communicate with one another, and end up in silos, significantly reducing the value of data.

 

Risks of Implementing ERP Systems

 

Understanding these risk factors is the first step in mitigating their impact. This provides the best opportunity to avoid them entirely, or to know how to cope with them if they do occur.

 

1. Implementation Costs

 

There's no way around it: adopting an ERP is expensive. That poses a risk for rather obvious reasons. If handled incorrectly, the project may go beyond budget, or a significant amount of capital will be invested to an ERP implementation that does not generate adequate ROI.

 

2. Implementation Timescales

 

While implementation costs must be carefully handled, timelines are equally crucial. Small to medium-sized organisations normally take 3-9 months to establish an ERP system, whereas multinational corporations can take several years.

 

Not only do costs rise as the process progresses, but so do the risks of the project stalling, executive buy-in failing, or the implementation failing completely.

 

3. Customisation Scope Creep

 

One of the most important aspects of an ERP is the flexibility to tailor the system to a company's individual requirements. It's easy to get carried away when developing a completely custom software platform, but this can be a key trigger for the first two problems we've discussed.

 

4. Underestimation of ongoing costs.

 

Continuous issues are frequently the result of how an ERP was initially installed. Total cost is one such possible concern, as implementation charges are only a portion of an ERP's total cost.

 

The average recurring costs of an ERP over a five-year period might be around $9,000 per user. That's a significant number on an ongoing basis, and neglecting to plan adequately for the cost during the implementation phase can have a long-term impact on the company's finances. 

 

5. Data Migration Issues

 

One of the primary benefits of deploying an ERP is the ability to consolidate multiple pieces of software into a single platform; however, this also necessitates the migration of data from one system to another. This migration process increases the risk of data loss, corruption, or unintended noncompliance with data regulations (e.g., CCPA, GDPR).

 

6. Vendor Dependence

 

Using numerous software platforms throughout a company creates inefficiencies as compared to using a single ERP. However, this diversification means that a vendor failure or a reduction in quality will only affect the business unit or area that uses that software.

 

With an ERP, a corporation will become reliant on the vendor for corporate planning. This poses a risk if the provider fails to supply as promised, and it is especially important for cloud-based ERPs without local backup.

 

7. Compliance and Regulatory Risks

 

Data security has gained significantly greater attention in recent years, resulting in a slew of legislative and regulatory frameworks for businesses to adhere to. When moving data from one system to another, there is a danger that part of it will be handled in a manner that violates these standards.

 

Also Read | Implementing ERP into Your Business Process

 

Final Words

 

The value of ERP systems in the FinTech industry cannot be emphasised. These technologies have evolved from simple systems for managing business operations to strategic assets capable of providing a competitive advantage in a highly competitive market. ERP systems have become an essential component of successful FinTech organisations due to their ability to streamline operations, ensure regulatory compliance, manage and integrate data, and generate cost efficiencies. 

 

Furthermore, statistics demonstrate the impact of ERP systems on the FinTech industry. According to a recent FinTech Magazine poll, 78% of FinTech organisations reported increased operational efficiency following the implementation of an ERP system. This highlights the actual benefits that these solutions provide, allowing FinTech companies to optimise their operations and drive growth. 

 

Finally, ERP systems have become a vital tool for FinTech organisations. Their capacity to simplify complex procedures, increase operational efficiency, and deliver real-time data for decision-making gives them a huge competitive advantage in a continuously changing industry. ERP systems have proven to be a critical component of success in the FinTech industry due to its capacity to scale and give a competitive advantage.