Despite EU regulations, many large companies have been accused of delaying payments to suppliers as a free alternative to loans. Payment and big data technology company Remitia thinks they’ve found a way to keep both sides happy.
The company was also the first British FinTech firm to make a partnership deal during Boris Johnson’s US trade mission earlier this month. It has joined forces with Elcom International, headquartered in Boston, to explore new methodology and technology to provide buyers and suppliers in the SME market with enhanced connectivity.
We caught up with Remitia founder David Brown to see how new financial technologies might be able to speed up buyer-supplier payments.
What problem is Remitia trying to solve?
Delays in B2B supplier payments are getting worse, but it’s very difficult to scale solutions for today’s market.
Our challenge was to look at the buyer. If he wants to protect his position, his first option is to delay the payment to the supplier in order to build their own cash position. It’s much cheaper to borrow from a supplier than from a bank. But this is a huge problem for SMEs, which are low on the value chain.
People are now expecting the buyer to approve the invoice, then decide which suppliers to offer it to. But what about if the buyer assigns the task of immediately paying the supplier to us? It doesn’t affect their cash position.
If Remitia covers the payment using our own balance sheet, and takes on the risk if there is anything wrong with the invoice, there is a positive outcome for both buyer and supplier.
How do you handle the risk?
With proprietary payment analytics which identify what risk we’re taking on. Internally, Remitia uses data analytics that peer deeply into accounts payable data for its risk pricing and risk analytics. This is a data source that is rarely mined internally or by third parties, providing Remitia with a unique perspective on a company’s business processes, going beyond spend analytics into something Remitia calls Payment Analytics.
Payment Analytics operates on the same data feed that Remitia uses, but provides insights into payment patterns and A/P operational patterns and their impact on working capital. For example, Payment Analytics automatically identifies are potential duplicate payments.
How does Remitia make money?
There is a low service fee.
Do you think regulation could solve the problem?
We’re not far away from legislation. Pushing the supplier payment out has become a corporate sport, a race to see who can leave it the longest. But the intended acceptance period is still a long time for a company to wait for payment when the number one reason for the failure of a business is cash flow.
You were the first FinTech company to make a deal as part of Boris Johnson’s US trade mission earlier this month. What is the value of your new partnership with Elcom?
There are a lot of what I see as networks in B2B. We see these networks as partnership opportunities, as a way to help them monetise and capture the value of their products. We’re hoping to move them up a level in the supply chain. The partnership will provide clients with complete instant and sustainable trading relationships.
What does the rest of 2015 hold for Remitia?
We are currently identifying new partnership opportunities, and just completed a funding round of £1 million. We’re putting everything in place for a major funding round in the summer.
But we need the resources to take the business further, meaning we’re making partnerships with universities to take advantage of the talent coming out of the likes of UCL. We want to be able to predict behaviour before an invoice happens.