Automating SMEs

Nearly two decades ago, enterprise solutions such as ERP (enterprise resource planning) stormed the corporate world, offering broad and complex solutions. They created an impression that no space will be left for smaller business solutions providers. "But fintech firms cannot be swept aside given their ability to plug in where ERP solutions are weak, and provide niche offerings," says Ajay Adiseshann, Founder and CEO, PayMate, a B2B payments solution provider, and the winner of BT-KPMG Best Banks award in the fintech-payments category.

"ERPs' IT legacy is all about millions of dollars in deployment and then management. Any change costs a lot. So, for them to change their model overnight is going to be impossible. Ours is transactional," claims Adiseshann, whose fintech firm PayMate is making an annualised transaction volume of $5 billion. Its platform caters to small and medium enterprises (SMEs) by automating invoicing, payables and receivables functions. Its product allows SMEs to extend payables and provide timely or early payments to suppliers. This improves their process efficiency and transparency in cash flows.

PayMate's Cloud-based platform enables SMEs to automate and digitise their entire procurement to payment cycle, including vendor management, vendor payments, invoicing, and supply chain financing options.

"As a platform, we work in conjunction with existing ERP systems. We are not trying to replace them. But there are core areas where we are better, and we will go deeper in those spaces and co-exist with existing IT systems. B2B payments is clearly a unique category in fintech," Adiseshann explained.

PayMate had adopted a business-to-customer (B2C) model to start with, but changed to a B2B model as the latter had the advantages of business predictability and unit economics.

Bridging Gaps

For many, a digital invoice is sending an invoice by email. "A truly digitised invoice is one sent on a platform that gets linked to a purchase order and other related pieces, and is completely reconciled into it. That is where we come in; to make it a unified stream of payment," says Adiseshann.

Supply chain ecosystems are fraught with delayed payments and funds needed in advance vis-a-vis due dates. Finding an opportunity in this, PayMate introduced different legs of credit facility based on data available on its platform - the first being a credit card or a commercial card for customers from banks and Visa. In January 2018, PayMate announced its partnership with Visa to enhance payment services. A couple of months later, it acquired Zaitech Technologies (Z2P), a digital lending firm, to strengthen its payments platform.

The second leg is invoice discounting for 30-45 days. If an enterprise is not willing to discount the invoice, it is channelled through third-party NBFCs and other institutions willing to discount. "The credit through invoice discounting is channelled to SMEs by PayMate or through NBFCs. The credit on our card to large businesses is channelled through banking partners. That is how we are creating this balance, and improving cash flows for small businesses," says Adiseshann.

PayMate, which has over 50,000 SMEs registered with it today, has its genesis in Adiseshann's earlier organisation Coruscant Tec, which provided mobile content and value-added services (VAS) to telecom companies. "The thought then was, how we could use that platform to send money to each telecom company. That was the first spark. Soon, we realised that using a telecom billing platform was not a viable option as it attracted taxes as high as 17 per cent. Then we decided to take the traditional banking route and see how we can plug ourselves into the banking platform and enable payments on the mobile. So, we carved out PayMate, in 2006," he says. Coruscant was sold to Mukta Arts in 2008.

Growth Pangs

By the time demonetisation and the push for digitisation took place, PayMate had been working to expand its digital transaction platform for customers and even small businesses.

"If you have a spark of an idea, you cannot say I will wait for the market to mature. You want to dive in, test out the product market fit, iterate and keep looking for that final fit. Then, when you find the fit, you think about scaling it up. That is what we have done. In fact, we were early; we had a patent in mobile payments."

During the initial five years, PayMate was catering to B2C payments and was among India's first mobile payments provider that allowed consumers to use their mobile phones to pay for online and retail purchases and make utility bill payments via their bank accounts. "Along the way we got some B2B use case opportunities. That started building up and then over time we phased out the consumer piece," says Adisheshann.

In 2011, PayMate switched to B2B segment, creating a niche in supply chain management to smoothen money flow, make GST payments easier, and tackle invoice issues, among other solutions. While B2B may offer predictability and unit economics there is also the challenge of longer cycles. "But once you achieve and win a customer, then they are there with you for a longer duration. So, there is a certain reward to that persistence to win a customer. In B2C, customers tend to work with multiple people, and keep shifting loyalties based on who is giving more cash-back," says Adiseshann.

Demonetisation, combined with GST implementation, played a role in pushing businesses from traditional transaction methods to digitised platforms. But the third dimension was the easy availability of smartphones and data, which has helped promote Cloud-based services to small businesses.

Looking Ahead

PayMate has as of now confined its operations to South Asia, mainly in India. It is associated with 50-60 large and medium enterprises, which in turn connect the fintech firm to 50,000 small businesses. Each small enterprise brings in its suppliers, vendors and dealers.

In July 2019, PayMate raised $25 million from investors including Visa, taking the total funds raised to $40 million. Those who funded the firm earlier are Mayfield Fund, Lightbox Ventures and Mayfair 101.

In March 2019, the company announced a global expansion in collaboration with Visa in 92 countries to provide its issuing financial institution clients in the Central and Eastern Europe, Middle East and Africa (CEMEA) region access to PayMate's platform. "Hopefully, in March 2020, we will be rolling out services in the UAE to be followed by Saudi Arabia in another couple of months, and in 12 to 18 months thereafter, across the GCC (Cooperation Council for the Arab States of the Gulf, formerly known as Gulf Cooperation Council)," says Adiseshann. PayMate claims to be the first Indian B2B payments company to have expanded its footprints in the international market.

Having built critical mass in the form of over $5 billion of annualised transaction volume on its platform, PayMate is setting its sights high - at $8-10 billion - during the current year.