World’s largest online invoice payment platform – Coming to Taiwan

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This probably is the most interesting overseas interview I have ever conducted. The interviewee, Sandy Kemper, lives on a farm surrounded by lambs and horses, and yet he is not a farmer, but the founder of C2FO, the world’s largest online working capital platform.

Last year, C2FO was listed by Forbes among its list of top 50 global fintech companies. It has clients like Walgreens and Costco, and investors like Peter Thiel, who is a renowned owner of Paypal, and Geoffrey Prentice, who was the co-founder of Skype. Between 2010 and year-end 2015, the aggregate receivable amount flowing through its platform had reached USD $40 billion, with 67% compound quarterly growth rate for market volume.

What’s interesting is that this financial technology company comes from a town known as Kansas City, a small city with a population of less than 500,000, which was once a midway trading stop during the times when the western part of the U.S. was still undergoing development. Kansas City lacks the capital of Silicon Valley or Wall Street, but today it is much more than just farmland where cows and lambs used to live.

Last October, C2FO opened an office in Taiwan, bringing its financial technology to a new market.

Heir of the fifth generation banker went into an early receivable payment business
I have many questions I would like to ask before the interview. As the fifth generation heir of a listed company, namely UMB Bank, Kemper’s father was considered by Walmart founder Sam Walton as “my most trusted banker.”  With family assets of tens of billions, why would he want to start a financial technology company? And because the nature of the business is one that has been very much rooted in the banking world for ages, isn’t he afraid of cannibalizing his own family banking business? And why have you chosen Taiwan, Mr. Kemper?

His reply was more about his story of why he started this business.

“When I told my father that I would resign as Chairman and CEO of UMB and start my own business, my father was so mad that he didn’t talk to me for half a year,” Kemper said.

Although his father viewed his actions as rebellion, Kemper saw it as seizing an opportunity that he saw at the time.

Kemper started his business in the exact same year when the financial crisis occurred. What he found out was that there are US $40 trillion of accounts receivable being trapped that could not be used as working capital, nor to generate better return. At the same time, small to medium enterprises were finding it difficult to secure financing.

Connecting corporates and their suppliers to reach sweet-spot collaboration on early payment rates
Kemper chose to develop a platform to enable corporates and their suppliers to set their own acceptable early payment rates. For example, suppliers would want get paid earlier, whereas corporates, that is, their buyers, would want to pay later. Under such circumstances, suppliers could offer a discount to their buyer and in return receive earlier payment for their receivables.

It all sounds pretty simple, but the technology that underlies it is necessarily complex. For example, the cash flow situation of each supplier could change any time, therefore, the discount it is willing to offer to their buyer would also change rapidly. In the past, it would take much effort and time to liaison, but now the market connecting the buyer and its suppliers can determine the “sweet spots” through its algorithm.

Kemper has similar logic in his choice of entering into Taiwan. He thinks Taiwan faces similar “problems.”

Statistics show that Taiwan corporates have payment terms of up to 75 days, which is only three days sooner than in China, but twice the average payment time of corporates in the U.S. So there is great potential in the Taiwan market. Because C2FO does not directly handle the flow of funds, the company can enter into the Taiwan market easily, as it does not fall within the jurisdiction of regulators.

Does the new business model work in Taiwan? The bigger fear is suppliers have no bargaining power
Chris Dark, President of International Business at C2FO, indicated that during an economic downturn, if buyers let suppliers turn to other means of financing at high costs, this will only hurt their supply chain and therefore the stability of their products. This is a high risk with the thin margins of the manufacturing industry in Taiwan.

Kemper indicated that his company does not charge any fee to the suppliers, but instead charges a commission on the discount amount enjoyed by their buyer, and at this stage his company has already generated profit. Currently, the company has been in discussion with 3 of the top 10 companies in Taiwan, exploring the opportunity for them to use C2FO.

Deloitte Risk Consulting General Manager Mr. Man indicated that the supply chain in the manufacturing industry is very closed-end, and some of the suppliers might get tied down, and so he is doubtful if suppliers and buyers could really collaborate equally in an open platform.

Interestingly enough, though Kemper’s new business seemed to be a revolution compared to his family’s banking business, his family seems to have a consistent view on the opportunities within their own market. Kemper’s grandfather chose Missouri instead of the crowned cities like New York to start City Center Bank, which later became UMB. It was 1919, the year after the First World War, when everything in the area was basically underdeveloped. His grandfather didn’t have ample capital resources, yet wanted to revamp the Midwestern market, and hence become a first-mover, which eventually led him to success.

“I like to create something from nothing, and to me, it is very important that you can solve a problem by your own hands, the bigger the problem the better…” Kemper says.

Many people think the Taiwan market is too small, but Kemper sees the risk in the manufacturing industry in Taiwan and wants to provide a solution.

A lot of people would choose a market concentrated with big corporates, yet the Kemper family saw the needs of rural communities. With more than 12,000 kilometers between us, over the phone, Kemper sitting on his farm reminded us through his story of how often we are buried in the worries of mature markets. Yet the Kemper family thinks differently: when you are at the heart of the issues, you can gain a thorough understanding of them, and that’s when you can find opportunities to start all over again.