November 8, 2019
The FinTech industry’s automation solutions for the MSME sector have taken over certain core processes. The first of these processes is financial bookkeeping and documentation of transactions – a manual task that was prone to human error as well as large investments of time and effort. In India, SME automation solutions have long been present. However, recent developments and interest in this segment compel us to give it a closer look.
To make things clear, let’s understand that there are three angles of FinTech + SME automation solutions. First, FinTechs that focus on SME problems and provide automation solutions to help them manage their finances. Second, FinTechs that use automation solutions themselves. E.g., SME lending company RupeeCircle and Indifi Technologies’ attempts to automate and digitize their processes to remove human intervention. The third type of players are ‘not-pure-play FinTech’ but provide SME automation tech solutions. E.g., Focus Softnet, an organization that specializes in developing smart platforms for end-to-end systems management, all overseen by superior AI that allows SMEs to analyze their financial data, create customized reports, and define metrics for financial measurement, and even interact with personnel as an assistant. For this article, let’s talk about the first angle: FinTechs that focus on SME automation problems.
The Indian MSME sector is unique, and those involved in managing expenses and revenue inflow streams within an organization have access to a very peculiar language. This language allows them to identify core organizational needs in terms of spending, as well as new revenue sources that can fuel further growth and development. Companies such as Finly in India are mastering this language and teaching it to machines that can process information and execute functions considerably faster than humans. With three main services offered by the organization for MSMEs, Finly is looking to transform expense management, payment collection as well as the tracking, recording, and reporting of transactions into a perfectly orchestrated symphony of sorts.
With the beacon of digitalization shining brighter than ever before, there has been a consistent increase in terms of investment into platforms and systems that can make financial management easier for SMEs. Recently, two startups – Khatabook and Udaan – received funding of up to $25 million and $585 million, respectively. The increasing interest amongst foreign investors in SME-focused startups stems from the crucial void that they’re filling within the sector in India. These startups offer platform-based solutions that help in the automation of financial processes, including payment tracking and transaction documentation methods.
A few interesting players in this segment are listed below:
Khatabook is an accounting service provider that focuses on MSMEs in India. It allows small merchants to record & review transactions, send SMS payment reminders, and generate reports along with vernacular language support. In September 2019, the company raised $25 million in its Series A round of funding from GGV Capital, Sequoia India, Tencent, and DST Global’s partners.
Udaan is a B2B e-commerce platform that also focuses on SME financing solutions. In October 2019, Udaan raised $585 million in funding from Tencent, Altimeter, GGV Capital, and Citi Ventures, and others. The company’s official statement states that they are “building Udaan as a trusted partner for small businesses across the country, to empower these entrepreneurs with technology, financial inclusivity, and supply chain capabilities to compete and win in an increasing tech and digital world.”
Swipez helps businesses streamline operations by automating their invoicing, payment collections, bulk payouts, GST filing, and customer data management. In Swipez’s own words, it is a digitization toolkit for small and medium businesses. It integrates accounting, digital payments, and customer data under one roof. The Swipez promise to improve cash flows for businesses by facilitating faster payment collections constantly. It suggests that businesses that use Swipez see at least a 35% improvement in their cash flows.
Fyle is an AI-based digital transaction platform that solves the problem of business expense reporting and management. For business users, it offers expense tracking of employees, automated compliance, and analytics for insights. It provides a data extraction engine that can identify and reproduce data from any type of receipt with a single click, which helps employees to file any expense without any manual data entry.
OkCredit offers a mobile-based solution for small-business owners and their customers to enable recording of credit/payment transactions digitally across the country. OkCredit provides tools to keep credit and payment records for the merchant’s business carried out on a credit basis. It digitizes transactions and records payments, thus reducing the burden of maintaining physical account books.
Recko is a SaaS-based platform that uses automation technology to solve business problems in the area of payment reconciliation. It provides AI-powered reconciliation of digital transactions and keeps track of the complete transaction lifecycle for organizations.
BharatPe enables payments for merchants through interoperable UPI QR codes. Recently, it announced its merchant service app, which allows users to record cash/credit sales, request accounts receivable from customers via SMS payment links, and keep track of accounts payable to suppliers.
PayMate is an online business-to-business payment platform that enables users to automate supply chain payments. Its services include payments automation, cloud-based dashboard & metrics, real-time tracker, and security & fraud protection. The platform also allows businesses to look for financing options.
The movement towards intelligent automation in India is visible in the increased interest that VCs are showing in SMEs that utilize AI and ML to power automated systems. Some recent investments, such as ones by Tencent, indicate that after China, India can be the next market for some exciting MSME-focused FinTech developments. The increased experimentation and risks define another aspect of the movement that Indian SMEs are taking to develop new avenues for IA in the region. These changes are the leading indicators of the growth of SME automation solutions in India – a trend that will continue to evolve and develop into the diverse possibilities that it holds.