Embracing the Fintech Revolution in Agriculture
What is Fintech?
When you swipe your card through a Square terminal to buy produce at a farmers market, deposit a check with mobile deposit, or send money through Venmo to pay a friend for lunch, you use fintech. Fintech or financial technology refers to the development of software and digital platforms for banking and financial services. Essentially, it's the application of technological innovation to financial services.
Fintech is a big deal. In 2023 Fintech will be a $180 billion industry, 8 in 10 Americans use digital apps and services to manage their money, and half use fintech daily. The industry is on a growth trajectory – last year, there were 30,000 fintech startups – and we are starting to see that growth in the agriculture space.
The Intersection of Fintech and Agriculture
Fintech has helped small businesses, which financial institutions often view as “high risk,” be seen as worthy of attention by banks and insurance agencies. Fintech is doing the same thing for farmers. As a specialized industry, agricultural banking, lending, and insurance have historically been left to only a few businesses. Yet, agriculture is a $1 trillion industry – that’s 5% of the US GDP. It’s too big of an industry to be ignored.
Fintech is transforming the agricultural financial landscape steadily. Fintech and big data analytics are making a difference for farmers. Farmers can now leverage technology to advance their operations, streamline processes and boost productivity. Fintech businesses are creating software and apps to better manage their finances, reduce risk, and access capital quickly. Here are a few ways we are seeing the intersection between fintech and agriculture and how it's shaping the industry's future.
Easier Access to Funds
The agricultural industry requires significant capital to get started – the biggest barrier to entry in agriculture is the price of land. And yet farmers, especially young or beginning operators, face hurdles in securing loans from traditional lenders. With digital lenders in the fintech space, farmers can fund their operations – if that is to purchase land or secure a line of credit— quickly and efficiently.
More Efficient Payment Systems
Fintech can streamline the process of payment in the agricultural sector. Today, 90% of the transactions in the agriculture sector still occur by paper check. Fintech is working to change that stat. Mobile payment services, like when the farmer runs your card at the farmers market, can help farmers receive payments quicker with fewer delays and less waste. It has also increased transparency in the industry as farmers can track payments from intermediaries and receive their fair share.
Farm and Crop Insurance
Farmers face plenty of risks from mother nature, including climate, weather, and pests. Adequate farm and crop insurance are vital for farmers to safeguard their investments and secure their financial future. Fintech has made the process of acquiring crop insurance faster and more accessible. With automated underwriting and smart contracts, farmers can quickly get insurance coverage and file claims in case of losses.
Market Analysis and Predictions
Fintech tools and platforms for market analysis and prediction have become more widespread in agriculture. These solutions help farmers stay current with market trends and identify opportunities to maximize their profits with commodity futures contracts and hedging. With data analytics, farmers can identify key areas to focus on and develop strategies to achieve their financial goals.
Shaping the Future of Agriculture Lending
The adoption of fintech in agriculture has revolutionized the industry, providing greater access to capital and more efficient financial management of operations. Technology in agriculture has increased transparency and created more efficient markets, enabling farmers to compete and thrive in an ever-changing environment. We can expect more innovative fintech solutions to emerge as farmers continue to embrace technology to drive their businesses forward.
