The Supply Chain Finance (SCF) in India is expected to bring a significant change in the next five years, driven by the power of technology, improved data analytics as well as strong regulatory support. Digitization has already brought immense benefits to the sector, contributing to closing credit gaps between businesses and simplifying the process of obtaining access to working capital.  

In the future, technology will enhance the speed of onboarding, lowering the per-transaction friction, and making the process more inclusive by using alternative data to credit scoring. The other exciting trend is that of the emergence of securitization, whereby SCFs are bundled together to form marketable securities, and thus investors are able to invest in them, thus enhancing liquidity.  

This inflow of funds by other investors than the traditional lenders will expand the range of financing and enhance the entire ecosystem. Veefin, an NBFC factoring company, Veefin Capital, intends to lead this change, propelling the efficiency and accessibility in the Indian SCF environment. 

Rise of Embedded Finance in SCF 

The future of SCF will always be determined by emerging technology, which will create more customer confidence and stability in the operations. Embedded finance will become a significant facilitator with SCF solutions being fully integrated into ERP systems, procurement solutions and invoice software. Such an open integration will contribute to minimizing the operational friction, facilitating the workflow, and increasing the transparency between all stakeholders.  

The accessibility of granular data, as well as the greater interoperability, will further contribute to the development of alternative credit scoring models, which will enable SMEs, or even individual micro-businesses, to obtain improved access to financing. It is also expected that blockchain technology will be a transformative technology, as it will offer a distributed and transparent registry that enhances trust, guarantees traceability, and reduces risks in SCF transactions.  

Moreover, predictive analytics will enable businesses to forecast disruptions prior to their happening and manage the working capital and financial readiness. All these innovations will contribute to the SCF ecosystem being more secure, transparent, and resilient. 

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New Capital Sources in SCF 

Securitization is one of the most promising trends in the development of SCF. This process will open new sources of liquidity and capital access through non-traditional financial sources by combining SCF assets to form securities that can be exchanged among investors. These types of mechanisms not only introduce new sources of funds on the market but also engage investors more into the Indian credit ecosystem.  

The securitization as a source of liquidity and risk diversification will become a key factor in ensuring that SCF is more scalable and sustainable over time. As part of Veefin’s overall vision, Veefin Capital is well-positioned to utilize these opportunities to provide efficient, technology driven financial solutions to businesses in the entire supply chain. 

FinTech Transforming Indian BFSI 

The intersection of FinTech and established BFSI institutions is quickly transforming the outlines of the Indian financial environment. The advent of digitization has reshaped the whole world, including consumer demands and the way financial services are provided, and FinTechs have become the center of this change. Interestingly, over 65 percent of CEOs of FinTech currently place more emphasis on partnerships, which is an emerging trend of collaborations, not competition.  

This synergy between the agility of FinTechs and the scale, reach and stability of banks is creating new dimensions of inclusion and accessibility. The convergence of the two ecosystems is now mutually leading to the democratization of credit and thus, the accessibility of financial services to small enterprises and underbanked parts of the economy. 

Also Read: India's BFSI and FinTech: Navigating Digital Transformation

Building Global SCF Ecosystems 

A good example of such cooperation is the one between Veefin and 12 state sector banks that are part of the PSB Alliance. Their collective efforts are creating the largest Supply Chain Finance ecosystem globally, which is an integrated network of lenders, FinTechs and businesses in a single platform.  

The program is meant to ensure that SCF transactions are as convenient as an app for consumers, but with the scale and dependability of the immense banking infrastructure in India. Such partnerships not only make it easier to access working capital but also introduce the latest technology to the traditional banking system, making it more inclusive than ever before. 

Next-Gen Supply Chain Finance 

India is becoming a global leader in inclusive financial innovation as collaborative models are ever-evolving and technology is constantly developing. Combined with the regulatory support, data-driven technology, and formative collaborations between FinTechs and banks, the convergence is transforming credit flow within the economy.  

The future of SCF that Veefin envisions is quite simple: to develop a system that is technologically powerful, financially inclusive, and competitive at the global level. Having innovation at the center of its operations and inclusivity as its purpose, the supply chain finance ecosystem in India is bound to establish new global standards of transparency, resilience, and accessibility. 

ABOUT THE AUTHOR:  

Raja Debnath has over 20 years of experience in the Digital Technology Services, Banking and Consultancy. Previously, he has worked in senior management roles for large corporations like GE Money, Kotak Mahindra Bank, Ernst and Young and International Finance Corporation. Raja has real-world banking experience, which lends to better implementation of advisory projects. He identifies potential partners and collaborators and works closely with them to establish mutually beneficial relationships.