Funding of Invoices in Real-Time: How Banks and FinTechs Collaborate to Enhance Real-Time Receivables Financing

The race towards real-time is real! 

In a world where 25% of business bankruptcies occur because of unpaid invoices, real-time receivables financing is the need of the hour. 

As a result, many businesses now have strict policies and procedures baked into their receivables processes.

Why prioritise real-time receivables?

Real-time receivables cater to the needs of our always-on, interconnected digital economy. 

Prioritising real-time receivables will help businesses manage their cash flow effectively and be well-positioned to take advantage of market opportunities, negotiate better terms with suppliers, and offer favourable payment terms to customers.  

To ensure ample liquidity for sustained business growth, organisations need to: 

• Encash their unpaid invoices and access immediate financing 
• Optimise working capital management 
• Better predict future cash flows 

The supply chain financing opportunity for banks

For banks worldwide—the potential market for supply chain finance—including every invoice and receipt issued by corporates is expected to be over $17 trillion.

Having said that, banks often face several challenges in catering to real-time receivables financing. 

Even today, most banks work with monolithic heritage systems that are far from agile. They lack the modern technology stack and automation capabilities needed to support quick invoice verification and fund disbursements. Moreover, advanced data analytics and the ability to monitor transactions and detect anomalies instantly are missing. 

That’s not all; a few of the other challenges faced include: 

• Traditional banks often require extensive documentation, which can delay the approval and disbursement of funds. 
• They tend to be risk-averse, leading to stringent credit assessments and cautious lending practices that can slow down the financing process. 
• Banks also encounter high rejection rates for trade finance applications, especially from Micro, Small, and Medium Enterprises (MSMEs).  

• Poor integration between different banking systems and platforms can result in inefficiencies and delays in processing receivable financing. 
• Many banks offer standardised products that may not meet the specific needs of different businesses, especially SMEs that require more flexible solutions. 

All of these challenges may lead to missed opportunities for real-time financing. 

At a time when there’s still a lot of white space for banks to penetrate in the supply chain financing domain—FinTechs have shown remarkable agility in adapting to the needs of SMEs and are building solutions that are inherently more favourable towards small businesses. 

What sets FinTech offerings apart?

FinTechs are leveraging the latest technological advancements to roll out proactive credit descisioning models, purpose-built financing solutions, and automated operations to enable a more user-centric experience.

Backed by an integrated suite of digitised solutions, FinTechs are empowering banks with: 

• ML and LLMs: FinTechs use Machine Learning (ML) algorithms or new Large Language Models (LLMs) to enable banks to detect early warning signals of potential payment delays or defaults.  
• Real-time data integration: By integrating real-time data, FinTechs facilitate immediate financing decisions and enable instant validation and processing of invoices. 
• Proactive credit decisioning models: FinTechs use advanced algorithms to quickly assess creditworthiness, providing faster access to funds for businesses. 
• Comprehensive SFC platforms: By allowing suppliers to upload invoices directly onto advanced supply chain financing platforms, banks can automate the verification of invoice details and ensure authenticity and compliance with pre-set criteria.

Our Co-founder & MD, Mr. Ram Kewalramani, recently joined a panel discussion at GTR UK 2024—A Nexus of Trade Finance Innovation to discuss “Real-Time Receivables Finance: Leveraging Bank and FinTech Capabilities”.

Bank-FinTech partnerships are bringing speed to service

FinTech solutions equip banks with proactive risk management models and significantly cut down on the manual intervention needed for pre-transaction checks.

Banks now have the option to leverage tech-driven solutions like: 

• Invoice discounting, and enable clients to receive early payments by using their accounts receivable as collateral. 

• Pre-invoice financing empowers clients to obtain funding based on confirmed Purchase Order (PO), Goods Received Note (GRN), Proof of Delivery (POD), and similar milestones. 

• Scalable trade platform helps businesses keep their borrowing capacity intact and meet risk mitigation, working capital, and cash flow objectives. 

• Unified receivables financing platform enables corporate clients to seamlessly integrate with the ERPs of new and existing financial partners and manage all receivables in one place. 

• Advanced working capital financing solutions allow banks to address the urgent working capital requirements of their clients. 

FinTechs today have access to capital and talent that allow them to be bold in their business strategies. With their emphasis on SME needs, they are significantly making their mark in the trade finance landscape.

Tap into the power of real-time receivables

To meet real-time invoice financing needs and grow market share in a rapidly changing trade finance market, banks will need to: 

• Sharpen their digital capabilities and 

• Forge strong partnerships with forward-thinking FinTechs who are already making a mark in this space. 

At CredAble, we provide a comprehensive working capital financing suite and are using alternative modes of credit scoring and advanced digital underwriting models to boost the supply of affordable credit and empower banks to improve their supply chain financing performance. 

Think Working Capital… Think CredAble!