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Partnering With Fintechs – Q&A – With Prabhat Vira, President Of Tungsten Network Finance

Recent research shows that financial institutions are increasingly forming partnerships with fintechs to create products that streamline and improve the customer experience and eliminate inefficiencies. The use of robo-advisory products, enhanced biometric security, natural language searches and data analysis, to name just a few innovations, is becoming more familiar as banks look for ways to introduce products that are intuitive and accessible 24/7.

Tungsten Network, a global business transaction network, recently announced its new collaboration with BNP Paribas to offer e-invoicing linked Receivables Purchase and e-invoicing linked Supply Chain Finance (e-SCF) to large corporates in the USA and Canada. Through this partnership, BNP Paribas and Tungsten Network will have the opportunity to use their combined strengths to originate and leverage innovation in the fintech space. It is the first partnership of its type and a sign that commercial banks are following the lead of their retail counterparts in teaming up with fintechs.

  • How is the relationship between banks and fintechs evolving?

Financial institutions are increasingly embracing the dynamic nature of fintechs and actively collaborating with them. According to research conducted by PwC last year, 82 per cent of financial services companies plan to increase the number of partnerships they have with fintechs over the next 3-5 years. The relationship is clearly collaborative and we’ve seen first-hand the synergies in combining working capital optimisation with digital automation.

  • What is driving this trend?

Partly the need to evolve and partly maximising the opportunity. Some banks realise that if they do not participate in fintech developments, they will lose business and revenue as consumers become increasingly comfortable with non-traditional players. According to a recent study by PwC,  88 per cent of financial industry executives said they feared their business was at risk to financial technology companies in areas such as payments, money transfers and personal finance. In light of this, instead of competing with fintechs, banks are seeing the wisdom of coming together in partnership. There is a growing realisation that each party has something significant to offer the other one – it truly is a symbiotic relationship. Fintechs often require access to capital, customers and large data sets to test their models and banks can easily provide this. Banks in contrast are looking for ways to overcome the massive inefficiencies in their legacy systems and offer improved customer experiences.

Collaboration with fintechs enables banks to serve their customers and offer more tailored, customer-centric products. Rather than seeing fintechs as a threat, partnering with them can enable financial services companies to outsource their R&D to them and bring new products to the market much more quickly and for less cost. Ultimately, the partnerships between banks and fintechs are creating a unique opportunity for the expansion of finance solutions, while adding real value for customers.

  • What does Tungsten Network’s new partnership with BNP Paribas offer each party?

Thanks to our new partnership, we can combine with BNP Paribas to offer a ’one-stop’ solution which links e-invoicing to trade financing on both the receivables and payables sides of the supply chain. In these solutions, the underlying trade instrument, the invoice, is both digitised and validated, making this a risk-mitigated solution.

Traditionally in working capital, a lot of energy is spent connecting clients and banks and on the payables side, onboarding suppliers onto the system. This creates a lot of friction in the relationship, and is massively inhibiting to successful supply chain finance offerings. The advantage in partnering with us is that these trade flows are already on our platform – it avoids having to onboard suppliers twice and deal with complex technology integrations. Ultimately, the partnership is mutually beneficial, making the overall supply chain process smoother.

  • How does it work?

Through e-receivables finance, customers are offered a finance facility from BNP Paribas against the value of the invoices due for payment through Tungsten Network. In addition, they can access e-supply chain finance for their own suppliers. It is a breakthrough for the industry – by linking e-invoicing with supply chain and receivables purchase, we are in a position to offer a solution that brings together process efficiency and working capital optimisation in a single portal.

  • What are the benefits to Tungsten Network’s customers?

For the first time, large corporates have the opportunity to receive an alternative working capital solution through the same technology provider they use for e-invoicing and procurement activities. As members of Tungsten Network, customers are able to access funds at attractive rates and in a straight-forward, hassle-free way.

In short, by getting their invoices paid early, they’re receiving the working capital they need to grow their business. They’re leveraging the financial strength of their Buyer, giving the assurance that the invoice will be paid. For the Buyer, providing their suppliers with access to finance, when it’s required and in a simple way, also provides the assurance of a healthy, reliable supply chain.

  • Do you envisage this offering being extended to include businesses in other parts of the world?

The partnership with BNP Paribas is currently only available in North America. However, there is a growing global trend as the adoption of e-invoicing becomes even more prevalent.  We see government mandates increasingly being put in place around the globe, and expect to see this integrated with working capital even more. What has started with just the upper Fortune 500 and FTSE 250 firms is now filtering down into the upper midmarket, particularly in the US and UK. It’s an exciting time for the industry and I’m looking forward to seeing how it evolves.