Transcript
Page 1: Solving Financial Constraints with Innovative Funding Solution

www.velotrade.com

Page 2: Solving Financial Constraints with Innovative Funding Solution

Solving Financing Constraints with

Innovative Funding Solution

• Financial challenges that SMEs or Start-up business

enterprises are encountering

• What are the traditional ways to deal with SMEs

financing?

• Is Fintech the only ONE that causing disruption to

Banks?

• How Fintech helps reshape the new ecosystem of

Trade Finance

• What are the major hurdles?

• Some food for thoughts

Page 3: Solving Financial Constraints with Innovative Funding Solution

Financial Challenges for SMEs & Start-ups

Small and medium-sized enterprises (SMEs), which account for 80 to 90 per cent of

Asia-Pacific businesses, have played a crucial role in stimulating domestic demand

and international trade in the region through innovation, job creation and technology.

After credit crunch in 2008, left with less capital to lend, banks have raised interest

rates for SMEs, which they are already reluctant to lend to. As a result, the SMEs

now have little bargaining power over lenders because of a lack of fixed assets and

poor credit records.

But even as their role in strengthening national economic growth seems to have

received much attention, lack of access to finance has been a key constraint on

the growth of SMEs. Financial systems in Asia and the Pacific have improved in

the past two decades, however, inadequate infrastructure, weak networks of

financial institutions and poor coverage of banking facilities inhibit the timely

availability of trade finance to SMEs.

Page 4: Solving Financial Constraints with Innovative Funding Solution

What are the traditional ways to Handle SMEs

Financial issues problems

The "bricks and mortar" culture, which banks and SMEs are both accustomed to,

cannot be changed overnight. It takes time for banks to learn about the operation of

SMEs in order to have a better understanding of the credit risks of SMEs in general,

and to set up an effective support mechanism for assessing the credit risks.

Banks will require high equity contributions, collaterals, loan covenants, credit and

personal guarantees or even guarantors.

Page 5: Solving Financial Constraints with Innovative Funding Solution

Is Fintech the only ONE that causing

Disruption

If traditional banks fail to keep up with the ever-changing demands of the

industry, they could face the danger of becoming obsolete

“The FinTech sector is a ‘double-edged sword’ for banks,”

Said Ms Susanne Chishti, chief executive and founder of FINTECH Circle

“On one side, the FinTech sector and the tech giants that have started to

offer financial services and lending, payments are clearly the most

disruptive threat the financial services industry has ever seen in its history.

On the other hand, FinTech firms provide solutions for banks which cannot

only speed up the internal innovation and transformation processes of

existing financial services players, unlock the power of Big Data internally

and most importantly help banks to survive long-term, as many tech firms

will start to offer financial services to their existing millions of customers

globally.”

Page 6: Solving Financial Constraints with Innovative Funding Solution

Is Big Tech, Not Fintech, Causing The

Greatest Disruption To Banking?

· Amazon Web Services (AWS), which provides services to dozens of finance

companies, including Aon, Capital One, Carlyle, Nasdaq, Pacific Life and Stripe

· Brazil’s Banco Bradesco Facebook app, which allows customers to conduct day-

to-day banking from Facebook, relying on the social network’s customer data

analytics to target users

· Capital One and Liberty Mutual’s “Alexa” solution (a voice-activated personal

assistant), which allows customers to check balances, pay bills and track spending

through these devices

Page 7: Solving Financial Constraints with Innovative Funding Solution

We address a market failure

Unfulfilled demand for credit

SMEs struggle to access export credit

markets at scale.

Large Exporters seek cost-effective,

sustainable and flexible sources of

liquidity.

1 2

Excess supply of liquidity

Professional Investors are interested in

trade receivables with attractive risk-

return and limited correlation to other

asset classes but cannot originate or

manage their operational complexity.

Page 8: Solving Financial Constraints with Innovative Funding Solution

Trade receivable discounting at a glance

EXPORTERHK Based SME

DEBTOR

European Buyer

VELOTRADE

For example: A HK based SME sells to a large European Buyer.

The payment is due in 60/90 days. The Exporter needs cash advance to be able to fulfil financial

commitments (such as rent, salaries, bills) without waiting for the invoice to become due.

INVESTORSVelotrade Marketplace

1. Invoice

Also by discounting the invoice the Exporter would be able to get cash immediately deployable to

increase the production (selling more earning more money).

Page 9: Solving Financial Constraints with Innovative Funding Solution

Very large addressable market

Source FCI & HKTDC

Growth

YoY:

Receivables discounting, not a niche!

HK SG

KR TWWORLD CHINA

USD 3 Trillion USD 400 Billion USD 200 Billion

EXPORT

Related:

7%

22%

12%

20%

8%

50%

Page 10: Solving Financial Constraints with Innovative Funding Solution

End-to-end solution for corporates and investors

Velotrade provides the technical infrastructure, handles the origination, carries out

extensive due diligence and robust anti-fraud procedures. We also look after the

settlements pre and post auctions.

ORIGINATE

• In-house sales team targeting corporates

• Banks partnerships

• Corporate partnerships e.g., logistics companies

DE-RISK

• Banks’ grade DD

• External information gathering e.g., Rating Agencies

• Internal risk assessment

INSURE• Partnership with Specialised Trade Insurer

(Euler Hermes)

MANAGE

OPERATIONS

• Settlement

• Reporting

• Collection

MITIGATE • Recovery

Page 11: Solving Financial Constraints with Innovative Funding Solution

We do this by using proprietary technology

Page 12: Solving Financial Constraints with Innovative Funding Solution

model comparisons

Benefits Banks Velotrade Non-bank lenders

monetisation of invoices

scalability of funding

lighter regulatory burdens

fast, efficient and user-friendly

online service

swift transfer of funds to sellers with

no minimum threshold requirement

flexibility to discount individual

invoices

transparent fee structure

We are more efficient, user-friendly and flexible than banks.

We are more scalable, cost-effective and flexible than traditional non-bank lenders.

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What are the major hurdles

How to prevent Fraud cases

The growing risks of fraud in the $4 trillion industry have led to heightened

regulatory measures, including increased checks around ‘know your clients’ (KYC)

and anti money laundering (AML) legislations.

As a result, 46% of the larger financiers have rationalised their funding away from

smaller businesses which are deemed to be riskier and cost-ineffective to serve.

The global trade finance gap is currently around $1.4 trillion, of which $693 billion

relates to developing Asia. 4 of products and offerings

Lack of products and offerings

In the fintech problem statement report produced by the Monetary Authority of

Singapore, the main problems of the industry were identified to be a lack of trade

credit products available for SMEs and inefficiencies in verification processes.

FinTech could potentially solve these via digitisation of trade finance processes and

building aggregator-type platforms to connect those who are seeking funding and

those who are providing funding.

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What are the major hurdles

Blockchain enables trade information to be truthfully represented on the

centralised ledger. It will revolutionise the old, manual way of information

processing to enable trade processes becoming more optimised, more transparent,

and less risky. This would benefit businesses of any scale to secure trust from

financiers, overcoming the costs arising from KYC and AML checks.

While cryptotechnologies like the Blockchain can potentially address the problems

salient in trade finance, regulatory frameworks are still far from complete to ensure

a fair playing field for stakeholders while ensuring the stability of current payment

systems. With uncertainty in regulatory expectations, businesses and

financiers are unlikely to adopt the technology right away.

Benefits for all stakeholders will only be maximised where mass adoption is

reached. One of the biggest challenges would be convincing the stakeholders that

the security of the distributed ledgers is comparable, if not better than current

proven networks.

Page 15: Solving Financial Constraints with Innovative Funding Solution

Some food for thoughts

1. Don’t build a Start-up, build a movement

2. Education is needed

3. Industry cooperation and active engagement issues is critical in bringing onboard

the adoption of such technologies to address the inherent gaps.

4. Banks and Fintech

Confrontation VS Collaboration

5. Disrupt and Create

6. Regulators

Forward looking VS Conservative

Page 16: Solving Financial Constraints with Innovative Funding Solution

DISCLAIMERThe material in this presentation has been prepared by Velotrade Management Limited (Velotrade) and is general background information about Velotrade’sactivities current as at the date of this presentation. This information is given in summary form and does not purport to be complete. Information in thispresentation, including forecast financial information, should not be considered as advice or a recommendation to investors or potential investors in relation toholding, purchasing or selling securities or other financial products or instruments and does not take into account your particular investment objectives, financialsituation or needs. Before acting on any information you should consider the appropriateness of the information having regard to these matters, any relevant offerdocument and in particular, you should seek independent financial advice. All securities and financial product or instrument transactions involve risks, which include(among others) the risk of adverse or unanticipated market, financial or political developments and, in international transactions, currency risk.This presentation may contain forward looking statements including statements regarding our intent, belief or current expectations with respect to Velotrade’sbusinesses and operations, market conditions, results of operation and financial condition, capital adequacy, specific provisions and risk management practices.Readers are cautioned not to place undue reliance on these forward looking statements. Velotrade does not undertake any obligation to publicly release the resultof any revisions to these forward looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts andhypothetical examples are subject to uncertainty and contingencies outside Velotrade’ control. Past performance is not a reliable indication of future performance.

For further inquires, please contact us at:

Velotrade Management Limited [email protected]

www.velotrade.com

+852 5808 3777

contact

velotradeTHANK YOU!


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