Last week, C2FO obtained fresh funding worth $200 million from Softbank’s Vision Fund, a famous $100 billion venture fund that has backed disruptive internet-based enterprises like Uber.
C2FO is a US-headquartered decade-old fintech that seeks to help mid-sized corporates get working capital relief by getting suppliers to accept early payment at a discount on an online marketplace platform. Its biggest clients includes US warehouse company Costco.
The injection comes barely eighteen months after it received $100 million in private capital from a group of investors that included Singapore’s government-owned venture capital firm Temasek.
Now, it says it wants to make a difference to working capital issues faced by cash-rich corporates in Taiwan, Southeast Asia and Australia and increase its market share in the intensely competitive working capital solution market.
"As we enter 2020 and 2021, we'll continue to expand into additional geographies where we recognise that small and medium-size enterprises are underserved by the banking community," C2FO’s chief financial officer Kerri Thurston said last week.
"We're absolutely seeing more interest in gravitating toward this type of flexible, low-cost working capital solution in our overseas markets. India and Europe have been successful locations for us to date, and we know there is still more opportunity in those markets.”
A LOOK AT C2FO’s GROWTH IN ASIA
C2FO says it now handles more than $1 billion in transactions every week. In Asia, it has offices in Mumbai, Singapore, Hong Kong, Shenzhen and Beijing.
In India, it says it tripled its growth in total users every year since 2015. An existing client in India is multinational pharmaceutical company Cipla, for example.
“If there are companies in India or China that are supplying to their Western counterparts and have dollar invoices, those can get discounted through our platform,” said Pradeep Gode, C2FO’s general manager for India.
Depending on location, not all suppliers are yet able to onboard onto the C2FO platform. “[However], customers like Cipla at some point could also use C2FO’s platform to deal with their suppliers in other places like South Africa in the future too,” Gode said.
C2FO also faces challenges breaking into in China where general manager Max Zhang said that traditional supply chain finance is still the norm. Hong Kong supermarket operator China Resources Vanguard is one of the early adopters.
In China, it only started operations in 2016 but it faces a stiff challenge from banks and fintech giants like Tencent that are also financing their supply chains on blockchains.
A recent scandal in the supply chain finance industry, however, involving an entertainment licensing corporation could lead to more regulatory scrutiny.
At the same time, there are many local players that seek to offer similar marketplace platform solutions to ease working capital concerns like Velotrade in Hong Kong, CapitalBay in Malaysia, Nemo in Singapore, KredX in India.
But it’s likely that C2FO’s first-mover advantage, its partnership with global banks such as Citi and its cross-regional network will help it grow in popularity as supply chain finance looks set to be disintermediated.
“We will continue to grow our bank relationships but there are other pools of capital that are really interested in purchasing receivables so those are areas where we will look to open up and build products,” said Gode.
MORE FUNDS ON THE WAY
Earlier in May, Softbank also invested $800 million in Greensill, a United Kingdom-based working capital finance provider.
Corporates that might not be able to pay off their suppliers early even at discounted rates might be able to avail the help of non-bank financiers like Greensill in the future – the firm says in a recent whitepaper that it seeks to help investors access corporate credit risk as an investment.
Lex Greensill, the founder of the British financing firm, said platforms like C2FO are well-placed in a changing financial environment as they can collect data on payment patterns building a better risk profile of suppliers.
His firm had no plans to take the mantle away from supply chain finance fintechs like C2FO or Taulia.
The renewed interest in funding should also allow supply chain finance programmes to move down the credit chain.
MOVING TO DATA-CONFIRMED SCF?
If they succeed in this manner then Greensill says he envisions working capital financing for both corporates and suppliers would change substantially.
“Supply chain finance that you know and understand today is going to look very different in two to five years’ time,” he said.
“We’re moving away from something that looks like buyer-confirmed supply chain finance [where funds to facilitate early payment are provided to suppliers of large corporates] toward something that is data-confirmed supply chain finance.”
But this is a promise that corporate treasurers would know has been around for a while.
‘Democratising’ supply chain finance invariably comes with risks and analysts have also criticised such efforts as they enable the lengthening of payment terms at the supplier’s expense.
For example, Receivables Exchange, a digital exchange for the trading of receivables, sought to do something similar but had to close its doors in 2016.
“In 2014, The Receivables Exchange was a struggling marketplace for accounts receivable,” states a recent report on fintechs by the London-based Centre for Finance, Technology and Entrepreneurship.
“It had shuttered its small business division back in 2012 in order to prioritize selling large companies’ invoices.”
“Its marketplace often had mismatches between buyers and sellers and was facing arbitration claims for fake accounts receivable sold on the platform.”
Since then, Receivables Exchange has rebranded itself as LiquidX, a global network for illiquid assets and mainly targets large buyers and banks.