Virtual connections, transparency and financing through one platform can make for just the right combination to support MSMEs
Tell me about FastTrackTrade and what it can do for enterprises in developing countries.
The idea was to create a secure mechanism for micro-, small- and medium-sized enterprises (MSMEs) based on technology that was decentralized. The basics of the platform are connectivity, simplicity and openness to every MSME with a very simple workflow for trade going from purchase documents to invoices to payments to requests for financing and insurance to tracking and delivery.
We had observed what the Chinese platforms were able to do in the last five years and it was remarkable. First, they started by connecting people – and of course they didn’t really focus on MSMEs like we are, but what developed was a way to organize. If you go by physical means there is no way you can cover isolated populations in a big country, so we looked at WeChat and Alibaba and what they did in connecting people and enabling them to chat – and that is then the basis for starting commercial discussions.
We wanted to create the capability to do commerce and to pay digitally. Those were the two initial elements. Then add financing and insurance. If you have a mechanism that shows what is done between two companies then you can organize your supply chain and all the services around it. Before there was no connectivity, no visibility, no transparency on transactions, and that can be remedied on the FastTrackTrade platform.
How does the platform work?
It takes five minutes to fill in your profile and explain what your business is about. Then you can start chatting with any user. We went for digital services that are tailor made for MSMEs and those with whom we want to do more integration. We have trade associations, we have financing services, there are great fintech solutions for the international transfer of money, there is logistics, legal documents, shipment tracking. We also have traditional services like IT support, accounting and marketing. So FastTrackTrade has a nice bundle of physically available, local and remote digital services so anyone can access the services that are essential for commerce.
The first thing for a business – and this is a big thing for emerging markets – is to have proper identification. In Singapore where I’m based it’s quite easy because you have a national database and you can check the name of the company, the registration number and even when it was created. But when it comes to emerging markets this is not the case. What we are doing right now with trade associations is to have a head of community enrol SMEs and check the registration documents for those that don’t have a registration number. The proof of check will be logged into the blockchain so that it can be found again later as a proof of identity. Then we will give an identification number so that any business can be properly registered on FastTrackTrade and do business with others.
This is really key because that is the starting point for digital commerce. If you don’t know I am reliable and you have never dealt with me before, how do you know I am responsible? This is why a lot of transactions never happen because of a lack of identity and trust. This is even more important when you look for financing because banks reject new clients if they are not properly registered and checking into businesses takes time.
Financing is an issue for small businesses and those wanting to start businesses, especially in Least Developed Countries (LDCs). What is the platform doing to offer solutions?
The financing element is big. Right now we have six trade finance platforms and you can chat with them via the platform. If there has been a purchase order approved, the buyer can either make a payment or request financing, in which case the trade documents will be pushed to the six financers at the same time. They will assess the transaction risk and give you an answer on the financing requested. Digitally.
In five clicks one has the ability without knowing much about financial services to be connected to financing platforms that can provide low value financing for your transaction.
In LDCs, starting a business may have its own obstacles. How could this virtual system help?
In emerging markets where there may not be the proper means to organize properly, the digital economy is going to burst, because once you connect people they start to do things together and they start to think about business first because that’s survival. If every morning you wake up and think I need to get one client so I can feed my family and then you’re connected with 50 or 100 clients via your phone, you’re not going to go physically to find a client. At least we have a way to have a connection with enterprises you didn’t have before, and then it’s a ramp up of interactions and use of more and more meaningful services.
For new companies created in emerging markets or companies that want to expand, oftentimes the first way to do business and develop is via social media, which helps them connect and develop networks that can help enhance a business. And that is the idea of FastTrackTrade: to enhance what you can do on a social network with proper business functionalities.
Tell me more about how you can see the impacts of this connectivity?
For financers they can have access to proper transaction data and the commercial graph of a business. They can also check the audit trail of transactions as they are recorded in distributed ledgers. They can avoid double financing. And just like the Chinese platforms a very different relationship develops because you can also accompany the growth of those businesses based on future cash flows. In addition, national aid can be triggered more efficiently as you can see the results from the money you inject into the system. Right now when I talk to a microcredit institution they say they are contacted, loan documents are sent, loan disbursement is made and they have no clue what it is used for and the effect on the business.
If you offer a way of requesting financing with an app, it can also have very nice effects. Because in certain countries when you get financing from a local person the financing cost can be as high as 100 percent of total financing. If you go to a microcredit institution it may be down to 30 percent, but I don’t see any reason it couldn’t be closer to 10 percent or even lower because you have security on the data and transparency on the transactions.
So in conclusion?
The world is a gigantic network, and it just needs to be connected for commerce. On FastTrackTrade everyone is a user, and we are working for a win-win-win balance.