Investments in technology is key to growth of supply chain finance in India
While supply chain finance has been in existence for a long time, it was restricted to large corporate houses in the ecosystem. However, the advent of digitisation and the use of technology have made supply chain convenient and accessible to MSMEs looking for funds, contributing significantly to the growth of the Indian economy. While the traditional supply chain financing was characterised by lots of paperwork, not so efficient data-intensive processes and expensive procedural delays due to manual reconciliations, with the right technology, supply chain financing has become quite streamlined, automated, and efficient to offer convenient and timely access to working capital to a large number of MSMEs in India.
With the advent of technologies like blockchain, supply chain finance can spread much faster for lending and make the process seamless as all parties involved can transparently view the contract. It can provide alternate financing with access to a well-structured framework when global supply chains are disrupted in sectors like electronics, automobiles, pharmaceuticals, and many more. Technology is at the core of transforming the traditional invoice discounting to dynamic vendor financing – which covers the entire supply chain and gives flexibility to every vendor to get access to this proposition as and when needed. The other biggest problem that technology solves is data security which is an integral part of the process.
Fintechs are leveraging technology in the lending space with custom-made ML models by using alternate data to overcome problems like lack of credit history or low credit scores. This is helping banks and NBFCs to move from an asset-based to cash flow-based lending model. AI provides deeper insights into repayment patterns and predictions on seasonality and defaults by using alternate data like GST data, inventory, transaction history, domestic economic factors, sectoral trends, mobile data, etc.Technology has also revolutionised supply chain
financing and made it accessible to organisations of all sizes across all geographies. Adopting technology and becoming digital has brought a number of benefits to all stakeholders (buyers, suppliers, and financiers). It has helped to facilitate the benefits of supply chain finance without the challenges and offers a win-win-win solution for all the parties involved in the transaction.