AUTHOR: Walter Gontarek, CEO & Chairman of Channel
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Fintech is disrupting many corners of financial services, but little is known about its emerging role in changing the working capital landscape. PWC reports that in 2018/19, €1.3 trillion of working capital could have been released from the balance sheets of globally listed companies if they had more efficient working capital practices. Commercial banks are increasingly embracing technology solutions to achieve benefits such as greater transparency and reduced time and costs with trade-related due diligence. However, in 2018 only 12% of banks rated themselves as mature users of digitalisation for working capital financings and 37% failed to prioritise digitalisation at all, according to the International Chamber of Commerce.
Enter Fintechs, consisting of both financing platforms and pure technology providers. But how exactly are these firms disrupting working capital markets?
At Channel, we adopt technology-driven finance for clients of all sizes. For example, we use prospecting tools to identify SMEs that meet the risk appetite of our investment platforms and funds, as well as for our partners in the trade credit insurance industry.
Next, in order to give the best user experience and retain our clients, we provide a technology-based, hands-free invoice management and financing solution with cloud- based hosting of all receivables, access to trade credit insurance, risk management reporting, soft collection services and financing in one relationship. We’re able to do this thanks to Open Banking, which allows us to harvest bank account data with the client’s permission, making it possible to predict and monitor bank account balances.
Lastly, credit monitoring and risk management also benefit from a technology-driven approach. Blockchain is increasingly utilised to reduce inefficiencies and maximise transparency in trade financing. For example, smart technology (or smart contracts) can trigger trade credit insurance payments for eligible claim periods. There is also a buzz around AI, with potential applications ranging from identifying “best fit” trade credit insurance providers, identifying unusual trading patterns and mitigating fraud risk by, for example, identifying social media footprint patterns across large data pools.
There is a significant amount of working capital to be released from global companies as they seek to improve their own efficiency levels and performance. Increasingly, Fintech is a valuable partner to these firms, providing them with innovative solutions and financing arrangements.
About the Company
Channel is a London-based credit investment manager founded in 2006; authorised and regulated by the Financial Conduct Authority, and is authorised as a full-scope UK AIFM. Channel provides technology-enabled business finance in an ever-changing world. Our working capital solutions include receivables/invoice financing, supply chain financing and other business financing.
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