Supply chain and logistics tech companies are gaining momentum with over US$8.3 billion in venture capital having been injected into the sector since 2012.
Supply chain and logistics tech companies are those that use software to improve efficiency across the supply chain and logistics ecosystem. They cover a wide range of areas and provide varied solutions from as e-commerce logistics, sensors and asset tagging, to freight and supply chain visibility, trucking, warehousing and inventory management.
In recent years, specific fintech solutions have begun to emerge to deliver dedicated financial services to the sector. These players are seeing the opportunity to tap into an industry that is in constant need of accessible and faster means of conducting business processes, including managing finances both in consumer-facing and back end operations.
According to McKinsey & Company’s “Supply-chain finance: The emergence of a new competitive landscape,” fintechs already control an estimated 10-15% of the supply chain finance market.
“Supply-chain finance (SCF) receives surprisingly little senior management attention for a market that presents such large and growing opportunities,” the report says.
“Traditionally dominated by banks, the market has more recently been entered by fintechs: specialist financial technology companies that provide platforms and software-based services to support SCF operations. These challengers are changing how buyers and suppliers think about the market, disrupting incumbent financial systems and providers, and starting to command a sizeable proportion of value pools.”
One particular issue that fintech startups aim to resolve is supply chain finance where late payment can often be crippling for SMEs in particular where margins are already tight.
Traditional models such as banking and factoring come with lots of paperwork for businesses and still often result in a 30-day payment period.
A technology that banks and startups are looking at to solve this issue is blockchain. Earlier this month, Chinese peer-to-peer lender Dianrong and FnConn, a subsidiary of Taiwanese electronics manufacturing giant Foxconn, announced China’s first blockchain platform for supply chain finance.
Dubbed Chained Finance, the platform aims to meet the hugely underserved needs of supply chain finance in China by delivering capital to smaller supply chain suppliers while providing large multinational manufacturers with enhanced visibility and transparency.
Other startups that are delivering similar solutions include Switzerland’s Gatechain and Singapore’s Skuchain.
Skuchain specializes in blockchain-based products for business-to-business trade and supply chain finance. The company delivers a solution called Bracket which records the terms of a trade, starting from the purchase order and automatically executes the flow of money based upon signals resulting from the flow of goods. This provides a real-time, reliable view of transaction state, bringing significant transparency for all participants and helping them build a more trustworthy and stable supply chain ecosystem.
A few other readily available applications of fintech in the logistics and transportation industry include solutions in the payment area that allow for instance peer-to-peer payment, business-to-business payment, mobile banking or credit/debit card innovation. Others include disbursement platforms, mPOS, as well as mobile and social data for credit scoring.
Manila-based Mynt is one of the companies providing such solutions. A financial services subsidiary of Globe Fintech Innovations Inc., Mynt aims to provide first-in-world fintech solutions through payment, remittance, real-time disbursement platforms, as well as salary and business loans, business solutions and international platforms that are accessible and scalable to various industries.
Featured image: Aerial view of a cargo vessel by Alex Kolokythas Photography, via Shutterstock.com.
