Mynd solutions has expertise in the business of vendor management for large corporates. We have been constantly working towards client needs for automating this service and felt the need for automation of vendor payments and financing needs. It got reconciled with our thought process for digitization of trade transactions ever since RBI announced the need for such a platform in the Indian financial system. This move by RBI is slated to bring all stakeholders – large corporates, their suppliers (small and medium enterprises) and banks on one platform to transact their business and all will benefit from the efficiency of the process and platform. This was a much needed step towards the growth of Indian economy as much as the growth of medium and small enterprises.
Mynd solutions has been a leader in offering advisory and outsourcing services to a number of clients, which include large corporates, banks and medium sized businesses. It was very suitable for Mynd Solutions to pitch for the mandate given our expertise in dealing with the main stakeholders of TReDS on daily basis. We also understand the complexities of working with large businesses which helped us won the confidence of RBI.
TReDS: An Innovative Transaction
The main purpose of TReDS platform is to facilitate smooth flow of liquidity in the system and make available the finance at a competitive rate. As soon as the bills are raised by the MSMEs and approved by large corporates on TReDS platform, banks or financiers can bid for them based on the risk rating of large corporates. MSMEs will receive their dues from the banks or financiers without waiting for the credit period agreed with large corporates. MSMEs will receive their dues from the banks or financiers without waiting for the credit period agreed with large corporate. The shortening of payment cycle and the smooth flow of liquidity through the platform will ensure that MSMEs do not lose out on business opportunities due to shortage of funds. The cost of funds will be reduced for MSME’s as banks will be bidding basis the risk rating of a corporate.
Banks will also benefit through the platform as cost of acquisition and servicing the business will reduce substantially. Further the MSME funding on platform will qualify for Priority Sector Lending (PSL) criteria, thereby enhancing the compliance for the banks.
The current industry size is expected to be between 30,000 to 50,000 crores. Only three entities have received a nod from RBI to launch their platforms, including Mynd Solutions. RBI has been meticulous in its endeavour to grant licenses to three different entities with their own expertise and skill-sets. All three have the capacity and capability to ensure that TReDS is a success story. We thus expect the industry to grow manifold in the near future thereby opening the gates for all players to cater to the market needs.
TReDS Down the Lane
Almost all the trade related transactions have already been digitised or are in the process of getting digitised. It is only the adoption by various stake holders that is taking time. The banks and fintechs are fine tuning these processes in digital formats and making it more attractive for the stake holders. This will improve the adoption of digital way of doing trade transactions. This disruption is happening globally and India is one of the front runners in this initiatives under the aegis of RBI.
Mynd solutions also works with clients across the globe with presence in over 60+ countries through its network. Through M1 exchange we are catering to an enlarged audience. Though TReDS is one product, we are looking at adding more products and services in M1 in the times to come. M1 has built in capability for digitisation of trade products and intends to launch them in various phases. M1 has launched its platform for the buyers, sellers and financiers to upload, bid and accept the invoice on 7th April with the support from RBI who also contributed their thoughts in the launch.
The Support System
In this era where finance is riding the wave of technology, there are numerous examples in our daily life ranging from e-wallets to loan aggregators vide online portals, where Fintechs and banks together are servicing the growing needs of business and retail customers. Hundreds of small sellers have been funded based on their rating and past track record on the portals. In the normal scenario it would not have been possible to reach out to so many sellers, make detailed credit appraisals, create charge on collaterals and fund them in such a short turnaround time of 2-3 days.
Fintechs are supporting the entire banking eco system to transform and enhance the speed of serving customers. The speed of innovation and its implementation has grown manifold with deployment of technology in financial world by Fintechs.