M1 TReDs – Treading the Digital Path

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 the 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 the 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 the TReDS platform is to facilitate the 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 the payment cycle and the smooth flow of liquidity through the platform will ensure that MSMEs do not lose out on business opportunities due to a shortage of funds. The cost of funds will be reduced for MSMEs as banks will be bidding basis the risk rating of a corporate.

Banks will also benefit through the platform as the cost of acquisition and servicing the business will reduce substantially. Further, the MSME funding on the 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 endeavor 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 digitized or are in the process of getting digitized. It is only the adoption by various stakeholders that is taking the time. The banks and fintech are fine-tuning these processes in digital formats and making it more attractive for the stakeholders. This will improve the adoption of digital ways of doing trade transactions. This disruption is happening globally and India is one of the front runners in this initiative under the aegis of RBI.

Mynd solutions also work with clients across the globe with a presence in over 60+ countries through its network. Through M1xchange 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 the digitization 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 7^th 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 a charge on collaterals and fund them in such a short turnaround time of 2-3 days.

Fintechs are supporting the entire banking ecosystem to transform and enhance the speed of serving customers. The speed of innovation and its implementation has grown manifold with the deployment of technology in the financial world by Fintechs.