Currenxie, a Hong Kong-based cross-border payments provider, is now offering customers inventory and logistics financing based on their Amazon trading history.
The company has for a number of years been providing forex and cross-border payments services to Amazon vendors, allowing Chinese companies to convert US dollar sales into local currency, at a rate much lower than Amazon’s own service.
But while the company is not alone in offering these services, it claims to be the first independent company to use the Amazon network to offer trade and supply chain finance to its vendors.
How? By using data: because Currenxie, which is partly owned by the Chinese internet giant TenCent, is already working with these vendors, it has access to its collections and receivables data. Because it is a partner of Amazon, it can use Amazon’s APIs to pull the sales reports, check transactional data and inventory and “control a lot of the risk associated with lending funds to online sellers”.
Yochanan Zvezhinskiy, the company’s head of e-commerce, tells GTR: “This is something that traditional lending channels can’t do. They don’t have the capabilities to minimise the risk to online sellers. They’re either not lending or lending in a very expensive way. Whereas we can do lending at a very low rate, 1% per month. You can go up to six months, but we’re extending it to 12 months soon.”
It’s worth noting at this point that Amazon already offers its own lending programme, but this is available on an invite-only basis. It’s also important to note that this model is not necessarily new: in China, services like Alibaba and Taobao have their own supplier financing programmes.
But this is an interesting development on the Amazon platform, which has surpassed Walmart to become the world’s biggest retailer. Its geographical scope is greater than any of its Chinese rivals, but online sellers are faced with financial challenges that are often more acute than their high street counterparts.
“One of the key headaches for an online seller is how to get finance to buy stock. They usually have to make sales and then reinvest that. Given the fact that the cash cycle can be quite long – up to two months in America – you have to get the purchase first, then ship it for there to be clear payment. Only then can you reinvest in inventory. It can be longer – what if your product doesn’t sell immediately? We’ve identified a clear problem that online sellers are having,” Zvezhinskiy says.
Currenxie started lending a few months back but is currently working with only two large clients, exposed by more than US$1mn. Currenxie’s own funding model is, right now, to reinvest their own profits from their forex and payments business, but Zvezhinskiy says he has held talks with capital market investors and funds who are keen to invest once the service reaches a tipping point.
Financing is currently capped at US$250,000 per round, but vendors can apply for multiple loans simultaneously, based on different cargoes and sales channels.
E-commerce is one of Asia’s boom markets. Across the region, small businesses are beginning to use the internet to export, bypassing traditional channels and red-tape. Financing, however, remains an issue.
For while large banks will certainly fund multinational supply chain finance programmes, e-commerce vendors are often sole traders – very often they don’t have a physical store at all. By collateralising their trading history and their stock holdings, small businesses may be able to gain access to the sort of financing required to beat expansive payment cycles and expand at a faster rate.