Invisible banks: The future of corporations

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Financial professionals investigating fintech solutions

John F. Kennedy once famously said – “When written in Chinese, the word ‘crisis’ is composed of two characters—one represents danger and one represents opportunity.” 

Although it may not be the correct interpretation of the Chinese characters, President Kennedy’s wisdom about a crisis creating unique opportunities is still relevant today. 

Every crisis gives us an opportunity to learn something new by resolving the current set of issues and evolving for a better future. The economies around the world have witnessed several crises in the past and each one of them has made us wiser than ever before.

The U.S. sub-prime crisis in 2008 and more recently IL&FS in India are such crisis lessons. Each has exposed us to the broken system of financial services and the traditional brick and mortar banking setup. 

The IL&FS default was an eye-opener for everybody including bankers, regulators and the business industry as a whole. If AAAs can go bankrupt, it calls into doubt any investment giving the expected rate of return.  

 When such events happen where we are entirely dependent on external information, several questions are bound to be raised, including:

  1. How do we as a company manage our treasuries, in these uncertain times?
  2. How do we ensure to achieve the expected returns from the funds we manage?

An opportunity to seek resolutions has led us to the evolution of invisible banking. It attempts to solve the above questions and more by going a level deeper and analysing a combination of instruments and data through robust technology and systems. 

Invisible banking attempts to mitigate risk along with providing sustainable generation of returns both qualitatively and quantitatively. A host of financial technologies (fintech) companies have emerged in the last decade and they have created innovative solutions. 

For each and every product available today in the traditional banking system, there is a fintech alternative that is being offered that provides better performance and value in a transparent and seamless way.

Fintech companies seamlessly combine three key components (Capital, Tech & Data and Network) to create business propositions and solve the current set of core problems we face today;

Capital When we talk about a source of capital, banks are what comes to our mind first, thereafter comes PEs, HNIs, and institutional investors. However, with the help of innovative fintech solutions, corporates can also now fund their own capital by accelerating their account receivables at attractive discounting rates.

Tech and data – There is a lot of data which is available with the businesses in the form of account receivables/payables, suppliers data, customers data, processes which with the help of technology and tools can be leveraged for a faster and better decision making and thereby leading to improved business metrics.

Network – Tech and data without a network will not be able to solve a problem at a scale. A network is the key as it leads to an exponential impact. Fintechs like C2FO are trying to solve this problem of network at scale by combining these three components – Capital, Tech & Data and Network and creating innovative solutions.  Using these, enterprise corporates are able to push liquidity back into the supply chain while suppliers are able to accelerate their account receivables at competitive discount rates. 

C2FO has helped companies ranging from manufacturing, retail, auto, and infrastructure sector, etc. to accelerate their receivables, bring down their debt, improve their cash flows and alleviate margin pressures. 

Solving core problems, fintech has received good adoption across industries. Even companies in the traditional banking system are partnering now with fintech solution providers or setting up fintech innovation labs.

As per the news reports, the top 41 fintech firms have a combined market value of $154 billion, equalling the market cap of one of the biggest banks in the world; Citi bank at $154 billion. 

Technologies like Machine Learning, Artificial Intelligence, Robotics and Internet of Things (IOT) have already disrupted the way we used to do business. 70% of  Fortune 100 companies want to incorporate IOT in their businesses and about 20 billion IOT devices are already connected with the cloud.  

The pace with which technology penetration is happening across industries, we are sure that Fintech is here to stay.

Neha Tyagi is a Director at C2FO