Page 308 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

Establish digital history:

A digital history of payments could be a boon for small suppliers. For example, lenders could use digital
histories to offer factoring and other types of receivables financing. That way, instead of waiting for the cash
flow to arrive from small buyers, suppliers could sell the invoices to financial service providers in exchange
for immediate cash.
Example #1, Visor:

Since January of 2014, Mexico has mandated that all companies must use state-approved e-invoicing services
to create all of their invoices. These invoices are then collected and stored by the tax authority. The Economist
described the law as “electronic arm-twisting,” to force businesses and individuals to pay more taxes. At the
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same time, the digital histories provided by these e-invoicing services could actually benefit small suppliers.

One example comes from Visor, a Mexican company that provides credit-scoring services and supply-chain
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financing aimed at small suppliers. Visor’s business model relies on large, multinational buyers that do business
with many small suppliers. The large buyers give Visor access to their e-invoices, including payment information.
Visor then uses that data to assign credit scores to all of the small suppliers. Financial institutions then partner
with Visor to provide supply chain financing to the small suppliers.

Payments from large buyers could take days or weeks. For small, cash-strapped suppliers, that time can seem
like an eternity. Instead of waiting, small suppliers could use that time to buy new goods or hire new employees.
Supply chain financing could allow the small suppliers to get paid faster, enabling them to use that capital to
expand their businesses. 21
Example #2: ‘Taobao villages” and Mr. Presta

Small suppliers have begun to tap into marketplaces like Alibaba, Amazon, and Flipkart to sell their goods
online. In China, so-called “Taobao villages” have begun to emerge, where communities specialize in specific
goods, like socks and shirts, to sell on the online shopping site Taobao. Since 2015, some of these villages have
begun to specialize in B2B goods. The city of Zhuji, for example, produced 25.8 billion pairs of socks in 2014,
or 30 per cent of the world’s output. Many of these socks are produced by local suppliers, and then sourced
to non-local Taobao sellers via the marketplace and funded with digital B2B payments. 22

In Mexico and Argentina, the company Mr. Presta is using data from MercadoLibre, an extremely popular
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online commerce marketplace in Latin America, to facilitate lending. Mr. Presta makes working capital loans
to small merchants on MercadoLibre that enable small suppliers to expand their businesses. While this is not
specifically a B2B loan, it shows how better payments data could enable financial service providers to offer
more products and services to B2B companies.

Mr. Presta claims that the small businesses in Mexico and Argentina are currently underserved due to a lack of
reliable information, an expensive analysis process, and expensive client acquisition channels. The company
helps overcome these barriers by accessing reliable information (from MercadoLibre) and building software
that allows them to make credit decisions and disbursements reliably and efficiently. Mr. Presta can then use
that data to partner with financial institutions to extend credit into B2B buyers and sellers.
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Example #3, Kopo Kopo:

In 2015, Kopo Kopo launched a “payments hub” product that allows companies to schedule and send multiple
payments at once. The product was launched as a B2B payments solution for merchants to pay their suppliers.

19 Electronic Arm-Twisting. The Economist. May, 2014.
20 Visor Website: http:// visor. io/
21 Based on an interview with Valeria Perez Rios, CCO Visor.
22 Research Report on China’s Taobao Villages, Ali Research. 2015. http:// i. aliresearch. com/ img/ 20160126/ 20160126155201. pdf
23 Mr. Presta Website: http:// www. mrpresta. com
24 Based on an interview with Carlos Rosso, cofounder of Mr Presta.

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