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February 17, 2016

As Banks Step Back, B2B Markets Find an Action Role in SMB Story


Online business-to-business (B2B) marketplaces have found easy business in financial inclusion for small and medium businesses (SMBs) which struggle for capital from banks. Tie-ups with Non-Banking Financial Institutions (NBFCs) and lending platforms work both ways for the online B2B platforms -ensuring a behavioural change in SMBs to shop online for their sourcing needs by extending credit facilities, as well as arming the marketplaces with data on SMBs to create a significant creditscoring mechanism for the small merchants.

“Six months back, the revenue from sharing data on SMBs looking for loans was zero. Currently , it forms 20% of our Gross Merchandise Value,“ says R Narayan, founder of Power2SME which recently raised an undisclosed round from existing investors Accel Partners, Kalaari Capital and on-boarded Nandan Nilekani as a strategic investor. The company will clock in a GMV of ` . 350 crore for the financial year ending March 2016.

While marketplaces make less than 1% of the transacted amount in commissions from sharing the credit scores for businesses with the lending institutions, the practice for extending credit to SMBs for their buying cycle mimics the loans extended by suppliers offline.

The potential of the B2B market pegged to grow to $300 billion by 2020 has caught the attention of financial institutions who are trying to bridge the gap which banks find too expen sive to fill. “The availability of data from marketplace, if done properly , cuts down our cycle to process the lo an from an average of 25 days to 8 days,“ says Ramakrishna Nishtala, COO of Vistaar Financial Services which works with Power2SME and other B2B marketplaces.

Read the orginal article

Vistaar Official