Fintech startup brings new invoice finance service to SMEs across Europe
A European fintech startup is entering the UK’s booming invoice financing market, with plans to expand to other European countries in the near future.
MatchPlace, a platform that has been offering foreign exchange and payment services for SMEs since 2016, has now launched a peer-to-peer invoice financing service in the UK, aiming to offer working capital at a lower cost than traditional lenders.
According to the firm’s CEO Benjamin Gedeon, MatchPlace’s decision to enter the invoice finance space was driven by the needs of its current customers, which include exporters and importers in the UK, France and Portugal, who were looking not just for easy access to financing, but also for a platform that could offer it as an integrated service.
“The first wave of fintech startups were specialising in one product, so you had a speciality in foreign exchange or crowdfunding or doing cross-border payments, etc,” Gedeon tells GTR. “Our idea is to aggregate those services. Because the SMEs have more than one need, they are more keen to go to a firm with a broad offering. Also, for us to scale our business, it makes sense to propose several services, because it creates cross-selling opportunities.”
As such, MatchPlace will continue to add new features to its platform, including hedging services by the end of this month, and cash analysis and cash management services next year.
Specifically, its invoice finance solution allows SMEs to submit their invoices and receive up to 85% of the value from registered investors. The platform can finance receivables of minimum £20,000 and a minimum residual maturity of 15 days from the start of the cash advance.
Some of the investments will come from smaller investment banks, which “are keen to inject money into the platform, because the return on investment is quite good for them”, Gedeon says, adding that MatchPlace has already started informal discussions with some financial institutions.
The platform utilises machine learning technology to make more sophisticated risk assessments and provide lower financing rates than traditional lenders, explains Christophe Monget, CTO of MatchPlace.
“When an invoice is submitted by a company, we use machine learning to evaluate the risk of the invoice and to determine the financing rate,” he says. “We do that by analysing different sets of characteristics of an invoice, such as the company who is submitting it, the type of good/service, the duration, the amount, and of course, the third party on the invoice, the company that will pay for it.”
Over time, he adds, the algorithm will “learn” in such way that it will reward good past performance with cheaper financing.
With the announcement, MatchPlace enters a market that is seeing growth despite concerns over what the future will hold for UK’s SMEs after Brexit. According to recent figures released by UK Finance, the third quarter of 2017 saw a 13% year-on-year jump in invoice finance in the UK and now stands at just over £22bn, the highest ever recorded.
At the time, UK Finance noted that the “exporting picture is particularly strong”, with sales from clients through export invoice discounting facilities up 33% in the first nine months of the year, and export factoring up 11%.
This growth has been documented by a number of players in the market. Tungsten Network Finance, for one, has announced it nearly doubled total originated invoice outstandings to a record £54.5mn, an 89% increase from the previous reported peak of £28.8mn in October 2017. MarketInvoice, one of the leading invoice financiers in the UK, has announced it has in one year almost doubled the average amount advanced to UK businesses – from £606,000 in 2016 to £1.14mn in 2017.
Meanwhile, MatchPlace also sees “huge potential” elsewhere in Europe, says Gedeon. The firm expects to expand its invoice financing service to Portuguese and French clients later in the year, and will also be looking to enter Spain and Italy at a later stage. The aim is to build a book of £30mn within the next three years.take me back