How FinTech is removing friction between businesses and their suppliers
Written by Richard Hurwitz, CEO of Tungsten Network
More and more we are enjoying the benefits that technology can bring. Drones are delivering packages. Robots are helping with cleaning around the house. Driverless cars have even begun ferrying passengers around some US cities. The recurring theme here is removing friction; doing away with tiresome, menial tasks that clog up our free time.
In the finance world, too, tedious jobs abound that needn’t. In my view the burgeoning FinTech sector is playing a huge role in reducing friction. Take electronic invoicing. As CEO of Tungsten Network, I’ve seen first-hand how digitising accounts processing frees up valuable time and resource to nurture partnerships. Equally, on-boarding suppliers reliably and securely fosters trust from the very beginning.
There are plenty of other examples of how FinTech enables frictionless business, such as Payoneer, an international money transfer platform that enables businesses and professionals to receive cross-border payments quickly, securely and at low cost – saving up to 90% on bank transfers while never leaving their desk. Another example is Lenddo, which uses non-traditional data from social networks and other sources to compute people’s identity and creditworthiness.
Technology is an enabler of relationships and development. Work streams like Procure to Pay – the implementation of a seamless process from point of order to payment – are allowing small businesses to link in partnership with large ones to innovate and grow. By cutting friction and easing pressure points in this way, the whole business community stands to benefit.
Technology is driving this change. In the retail industry, for example, automation and artificial intelligence are being used to speed up picking and packing. Current advancements in logistics are enabling humans to ditch the boring jobs and carry out more highly skilled tasks, such as robotics management.
Locus Robotics, with its strapline “robots empowering people” estimates that its warehouse solutions can help workers become up to eight times more efficient. Likewise, on the shop floor Target in the US is trialling a robot to track inventory – thereby freeing up staff to help customers more.
Twenty years ago, there were less than 700,000 industrial robots worldwide. Today, there are 1.8 million, according to figures from PwC, and this is projected to be as high as 2.6 million by 2019.
PwC carries out an annual survey of 1,400 CEOs around the globe. The most recent survey reveals that 52% of CEOs expect technology to have a significant impact in changing competition in their industry over the next five years, and 23% expect technology to completely reshape it.
Technological changes, perhaps, should be the focus in finance too. From procurement to payment there are plenty of opportunities to upgrade technology, yet many businesses still utilise time-consuming, unpredictable and inefficient sourcing and payment practices – wasting valuable human resources that could better target business growth and innovation.
To return to an example I’m familiar with, every day businesses waste time and energy by manually checking invoice documents received from an increasingly global supply chain, when technology exists that can reject incorrect invoices before they even arrive. Continuing with the theme, further time and energy is wasted for businesses and their suppliers who spend time calling and emailing to check on invoice statuses instead of accessing the information online. This friction can all be avoided.
Later in the accounts payable process, unanalysed procurement data stagnates in these paper invoices, instead of being quickly captured to understand procurement trends that can inform spending decisions. For suppliers, potential working capital is tied up in unpaid invoices, unavailable to be pumped back into the business and invested in targeting growth through new contracts or equipment. While invoicing is an old world example, the potential of digitising it sums up what FinTech is all about.
All businesses must think about what innovative solutions are out there, finance included, or risk falling behind the competition. At multiple points in the business lifecycle, sticking points and delays with manual systems cause friction not only for consumers of financial services, but also between suppliers in the industry and the businesses with which they work. This risks sowing conflict and mistrust between partners, weakening the trusted relationships on which supply chains are built.
I would argue that not embracing the potential offered by FinTech is a huge risk, causing friction at multiple levels. This can manifest itself in multiple ways: suppliers reticent to jump through too many hoops; administrative employees’ patience wearing thin; and finance departments hesitant to greenlight funds. Combined, the impact on the bottom line could be considerable.
The opportunities are endless and I’m confident that there’s even more potential for FinTech to enable the digital transformation of business processes, connecting buyers and suppliers with streamlined financial services capabilities and ultimately, removing friction across global trade.