Fintech providers are disrupting the Bank-led supply chain finance industry.
Recently, Bairong (百融云创), Isuwang (快塑网) and SinoGuarantee (中合担保) began to cooperate on building a supply chain financial product for SMEs(small and medium enterprises)in the plastics industry. The platform completed its first loan on October 11th.
Bairong is a fintech company focusing on intelligent risk management, credit assessment, asset management, customer value management and related fields. Isuwang is a B2B e-commerce platform for plasticizing industry, providing supply chain services around SaaS, finance and logistics integration. SinoGuarantee is a financial company providing tailored financing and guarantee services; it is sponsored by the National Development and Reform Commission of China under the decree of the State Council.
The three parties intend to cut into industrial scene through deep cooperation with Isuwang, combined with fintech and big data services from Bairong, while leveraging SinoGuarantee's advantages in capital and innovative products. In this way they will be active in both the upstream and downstream of the plasticizing industry through online products and services.
Fintech has been changing financial services in the retail sector dramatically – for example, in the mobile payment, private loan and wealth management areas. Now it is looking to transform the B2B fintech business, especially in supply chain finance.
According to the China Association of Small and Medium Enterprises, by 2018 the trade in receivables, inventories and prepayments totaled nearly CNY 110 trillion (USD 15.54 trillion). Among these, the demand of accounts receivable was more than CNY 13 trillion (USD 1.84 trillion), but only CNY 1 trillion (USD 0.14 trillion) in demands could be met.
At the same time, the largest beneficiaries are large enterprises. Banks are reluctant to engage in providing finance for SMEs – now, most of these are struggling from a shortage of cashflow. Moreover, many SMEs are limited by an inability to finance their businesses due to a lack of key information with regards to their operations.
Fintech companies can back banks to provide financing for SMEs with their strength in risk control. For example, based on AI, big data, blockchain and other technologies, Bairong has integrated industrial and commercial elements, along with judicial, tax and more dimensional information to build corporate credit reports. With regard to supply chain loans, they can analyze whether the downstream and upstream of the industry are stable and see the viability in the number of transactions while digging into relevant relationships, then producing risk-avoidance strategies to help financial institutions make decisions.
Besides this, the government is paying increasing attention to supply chain finance. In August 2019, the National Internet Finance Association of China announced that they were ready to launch an information platform for supply chain finance. They said, "The platform will collect, organize and process the information of these firms comprehensively from related supply chains and industry chains to depict such firms at different levels in a complete business network."
The Chinese supply chain finance market generated an estimated volume of CNY 22.18 trillion (USD 3.13 trillion) in 2019, representing a compound annual growth rate (CAGR) of 17.68% between 2015 and 2020.
Looking to the future, we can expect that the combination of 'fintech plus supply chain finance' will develop towards comprehensive service platforms for the whole industry. Standardization, automation and distributed businesses are the upcoming trends.