The platformisation of trade credit

Christophe Spoerry
Oct 28, 2019 · 3 min read

It started with Amazon for retail and Airbnb for accommodation.

Today, virtually every sector is being disrupted by some form of marketplace or platform.

In the credit space, peer-to-peer lenders such as Lending Club or Mintos kicked off the trend, matching investors with people and small businesses in need of a loan. The P2P lending market is projected to grow at a compound annual rate of around 50% until 2024, to reach almost US$900bn in value.

Innovation in P2P finance

While these platforms initially targeted private individuals, small business owners, who tend to find it difficult to access bank funding, have increasingly turned to these alternative solutions over the years, leading names like Funding Circle to start offering business loans.

In fact, according to a 2016 report by Transparency Market Research, the fastest-growing segment of the P2P industry is small business loans.

“The small business sector accounts for a lion’s share of the total market’s revenue. This is mainly due to the fact that small businesses might not have sufficient capital. According to market analysts, the small business sector is expected to expand at a phenomenal CAGR of 48.8% [between 2016 and 2024],” the researchers explains.

Invoice finance and the SME focus

At the same time, the global fintech movement has seen the emergence of thousands of alternative financiers focused on SMEs, particularly around invoice discounting.

Among them, Marketinvoice has seen tremendous success in the past five years, raising millions of pounds in Series A and Series B funding, and financing over £2bn of invoices in the UK since 2011.

Today, Marketinvoice is planning to expand further than its home country, which could ultimately mean international cross-border credit facilities.

In the credit insurance space too, the platform revolution is happening: Alibaba’s B2B marketplace already includes ‘Trade Assurance’ suppliers, and insurtech players like Hokodo or CoverGenius are looking to bring trade-related insurance products onto digital platforms, with very positive results and growth.

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Trade finance challenges

The consolidation of the SME lending sector, and the growing popularity of the marketplace model in the B2C and B2B world are changing the face of financial services.

Even in the slow-moving, bank-led world of trade finance, platforms are emerging, to the point that a whole new word has been coined to the movement: tradetech.

Earlier this year, Trade Finance Global categorised the 40 main tradetech players into five types: asset distribution platforms, supply chain finance platforms, blockchain initiatives, digitalisation and IT systems. Every week, new partnerships are announced between incumbents and disruptors, and new connections are made among the various links of the trade finance supply chain.

From the dataification of B2B trade, to marketplace integration best practices and KYC due diligence, players in the trade credit ecosystem can no longer afford not to understand what this platformisation means to them.

Alpine Style will be holding meetups about SME finance on B2B marketplaces in Paris in March 2020, and in Los Angeles in September 2020, to explore this topic through a guided roundtable and speed networking sessions.

Click here to find out more or apply to participate.

Article initially published here.

alpine-style

Wild ideas, unexplored routes, unchartered summits.

Christophe Spoerry

Written by

Building the future of B2B commerce

alpine-style

We build innovations in B2B trade, trade finance and credit insurance. We create business options for tomorrow. We start from a blank sheet of paper, and take each venture to the summit. We focus on platform business models, data-driven strategies and decentralized finance.

Christophe Spoerry

Written by

Building the future of B2B commerce

alpine-style

We build innovations in B2B trade, trade finance and credit insurance. We create business options for tomorrow. We start from a blank sheet of paper, and take each venture to the summit. We focus on platform business models, data-driven strategies and decentralized finance.

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