How ‘Internet Of Systems’ Can Drive SMB Finance Transparency

The Internet of Things (IoT) has ushered in a new era of the digital economy.

Centered around breaking down silos, IoT technology not only encourages the digitization of everyday items like kitchen appliances and shipping containers, but also collects data from those products, centralizes that information, and introduces new opportunities for automation and analysis.

The concept of an interconnected ecosystem using data to bridge silos has the potential to go beyond “things,” however.

According to Leo Berghald, CEO and founder of Zwapgrid, this strategy can be particularly impactful in the business back-office as a way to interconnect a variety of software and cloud-based solutions.

“Instead of talking about connecting kitchen appliances, we can provide an online connected experience between companies — even if they have chosen different financial systems,” he told PYMNTS, noting that this approach is dubbed the “Internet of Systems.”

A Decade Of Disparate Technology

For years, small- to medium-sized businesses (SMBs) have been leaping at the opportunity to digitize their back offices thanks to the rise of FinTech and the ability for more agile tools tailored to smaller firms to bring enterprise-grade solutions to the SMB market.

The last year alone has seen this trend occur at warp-speed. Although this digitization effort is now a necessary one in order to empower businesses and their teams to keep operations flowing in a remote work setting.

Although the purpose of digitization in the finance department is, in many cases, to strengthen cash management, the effect of so many siloed systems can actually be quite different. As Berghald explained, that’s because each critical function — from invoicing to payment to accounting — all occur separately from each other.

FinTech platforms have moved to address this point of friction in recent years by embracing collaboration and application programming interface (API)-powered connectivity with other portals, but even these can cause breakdowns in the movement of data.

“The communication between all these systems becomes a major issue since the integrations [and] connections between them often are malfunctioning,” he said. “That, in turn, creates loads of work to confirm and check data, or even worse, to manually transfer data from one system to another.”

It’s a strategy that runs the risk of errors, of course, and as Berghald said, in some cases this can result “in worse cash flow.”

Bringing It All Together

Despite FinTechs’ embrace of APIs, whether these connections must be facilitated manually or don’t operate as they should, the technology is not a silver bullet to the data integration challenge.

Zwapgrid is positioning itself as a purveyor of the “Internet of Systems” in order to address the pain point. The company provides a platform that acts as the central hub to connect with a, SMBs’ various back-office financial platforms, integrating those portals’ APIs or working out data connectivity by other means.

But the opportunity to drive value for businesses is not only in connecting data. It’s also in enlightening transparency throughout the supply chain, according to Berghald.

For example, he said, a B2B supplier will not only be able to gain a more holistic view of internal operations, but can also gain insight into when a customer has received and processed an invoice, and when that client has initiated and submitted payment. The company, based in Sweden, is also able to integrate into the Nordic region’s banking infrastructure to facilitate payment initiation, transaction reconciliation and onboarding with bank platforms.

The firm isn’t the only company targeting SMBs with a solution to this intensifying pain point. As more FinTechs prioritize API connectivity, and as open banking expands into new markets around the world, the options for consolidating data across back-office platforms continues to grow.

There are new challenges emerging in this space, too, with data connectivity solutions not necessarily platform-agnostic and potentially limiting the kinds of solutions that SMBs can adopt.

But as more businesses accelerate their adoption of siloed FinTech solutions, connecting the dots of information will be vital to achieving the kind of cash flow control and visibility that business leaders seek.