Trade finance platforms provide lifelines for Asian B2B markets

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The great digital transformation is to bring B2B fully into the 21st century – and digital markets are a key component of it.

But even as markets spread, the inability to offer trade credit to buyers prevents them from realizing their full potential to change supply chains.

Speaking with Karen Webster, Nir Tal, CEO of Israel-based FinTech Transigo, confirmed the PYMNTS results that show a significant “trade gap” as a result – in the US alone, $3.1 trillion is the net amount owed by US companies in accounts receivable at any given time. a certain day.

Read also: $3.1T trade credit squeezed US companies

It is trade credit, after all, along with insurance, that can ensure that sellers complete the sale and that buyers stick to it. Without it, cash comes later and later, which burdens working capital. Smaller companies feel the burden, and they are the lifeblood of the online marketplaces themselves.

Tal said that B2B marketplaces that provide terms for buyers can boost customer loyalty and even order volumes — especially in Asia, which has been a major market for importers around the world.

Markets are evolving

Funding is an important factor to consider as marketplaces have become more than ‘yellow digital pages’ – guides in the sense that they have simply served to identify buyers and sellers for a subscription fee. Markets are also losing revenue that would have been earned from trade fairs, which have been effectively hampered, perhaps in the long run, by COVID.

“I don’t think we’ll ever go back to the huge ‘deal closing shows’ we’ve seen in the past,” Tal Webster said.

As a result, markets have shifted toward business models based on transaction volumes, following in the footsteps of Amazon and eBay, to help buyers and suppliers move everything through supply chains, from household goods and accessories to consumer electronics to beauty supplies.

But with every wave of COVID hitting the world, supply chains have been compromised, bringing more uncertainty into the mix.

“People have talked to us about delaying the goods for too long,” he said. “This has a particular impact on the business of importers and sellers of SMEs, especially retailers.”

Longer delivery times, of course, mean that small businesses have had to switch to air freight and other means of getting goods in stock and on shelves more quickly, often at the expense of margins.

the solution

To help businesses remove these new hurdles, Transigo offers a B2B Pay Later solution – via an API integration that allows platforms to extend net terms to 120 days for international transactions, up to a maximum of $500,000.

Buyers using Transigo’s Pay Later system allow security and compliance checks and access their bank account information through Plaid. With the help of artificial intelligence (AI) algorithms, Transigo then conducts a credit assessment and decides whether to extend credit (usually within minutes). If the buyer chooses to click Pay Later at checkout, they will receive the payment terms while the platform funds the transaction for the seller.

In addition to relying on AI decision-making technology, Transigo also reduces downside risk by using credit insurance coverage and drawing payments directly from borrowers’ bank accounts. He said the markets and exporters behind them pay nothing and have no risks associated with the Transigo service.

Building on the new investment

Earlier this month, Transigo said it had secured $70 million in funding to expand its cross-border B2B marketplace services. The company committed funding to expand its Software as a Service (Saas) platform to key Asian markets this quarter.

Read more: Transgo secures $70 million in funding from Israeli companies

Asian markets usually offer a limited set of payment options – tied to prepayments, for example, or perhaps credit cards. They may use a wire transfer, which exists as an electronic method of transferring funds via external telegraphic transactions, but with a SWIFT fee.

After all, he said, “a buyer can top up their credit card with a maximum of one order — and of course, financially speaking, that can really be a pain.”

There is urgency, as recent PYMNTS reports indicate that cross-border e-commerce sales will continue to rise. The value of global cross-border retail payments is expected to increase from $1.95 trillion in 2016 to $3.56 trillion in 2022. Transigo has indicated that cross-border e-commerce in China alone will reach $1 trillion this year.

See also: Domestic payments are the gift that keeps giving to global merchants

I look ahead

After launching in several markets in Asia, Tal said Transigo is looking to expand its payment services to other countries – most notably Australia and Britain, strongholds of open banking. The company is looking to raise another $250 million to support this expansion.

For the markets, there is a strategic and competitive advantage in offering trade finance through Transigo, he said. Of the platforms, he said, “They’re at each other’s throats trying to reach these buyers.”

He said that the provision of net terms enhances the recurring revenue of the markets. If a buyer has credit on a platform and knows they can buy on net terms, they will continue to transact on that platform, which boosts customer loyalty.

Extension of trade finance can also help markets mitigate seasonal volatility. As he told Webster, platforms like Alibaba see volume surges for several weeks or months before the holiday selling seasons in end markets. And then, of course, there are “dead zones” where activity demand subsides.

He said offering credit helps buyers get the firepower available to buy more and more throughout the year.

“Credit terms cause buyers to buy more goods — which is great for the markets,” Webster said.

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