Summary
Demica - The power of partnerships and collaboration in the Fintech space and sustained growth.
We continue our series ventures perspectives; where we speak to entrepreneurs and senior leadership from the flourishing Middle East tech ecosystem.
In the second episode of Fintech Insights; Mansour Davarian, speaking on behalf of Demica joins Financial Services Partner, Mark Stanley looking at the power of partnerships and collaboration in the fintech space and sustained growth.
Demica is a leading provider of independent, technology-based alternative finance services, providing innovative working capital solutions. Mansour reflects on how Demica has seen significant change in the working capital space with significant requirements for financing in the market. Demica support their customers by enhancing the deployment of that capital and enable our customers to grow across both payables and receivables financing, as well as introduce more complex products to their products such as portfolio purchases, or even securitisation, at the sort of extreme of the working capital products.
Demica and Mastercard recently partnered up to introduce a supply chain finance capability to improve access to working capital solutions. They also partnered with cocoa manufacturer Barry Callebaut to roll out a sustainability-linked supply chain finance programme for its ingredient supply base based on Demica’s platform with labor, health, safety and environmental standards. Mansour discsuses with Mark how successful partnerships like these help them toward their vision to underpin global open account trade.
Mansour shares how Demica originated in the mid 1990s with a product built to provide securitisation reporting for corporates which was then issued to banks and enabled them to fund against their trade receivables books. In the mid 2000s, surviving the dot.com bubble and burst; the firm started working with banks building a payable solution onto the reporting. That work led to their partnership with ING deploying a white label solution for them. In 2014, the acquisition of the firm had a transformational effect for the underlying solution and began their transition to a much broader solution provider, both in the corporate space as well as the provision of technology facts.
Mark & Mansour explore the benefits and challenges of being both competitor and partner. Mansour explains whilst there are challenges and not all banks appreciate the position, largely that competition is welcomed in the market;
‘We have a close relationship with our bank partners. Where there are opportunities in the market that are specifically focused on technology, it's better for us to play in that space, because the competition is other technology providers & fintechs. If we win those, we're able to bring that business to our bank relationships. I think that there is more acceptance these days because fundamentally, we are working hand in hand, we're not being a liquidity provider.’
Throughout the discussion Mark & Mansour dive into the recipe for Fintechs in the region and large organisations overcoming the perceived and actual carbonisation of large traditional organisations to successfully partner and grow. From a commercial perspective Mansour provides the example of the payables space being a growth market in the Middle East.
‘This growth has come after years of education of not only the customer bank, but the customer base, but also in respect of the corporates understanding how the product works.’
Meanwhile from the fintech perspective having more creative revenue models has contributed to to their success
There can also be technology challenges too for a successful partnership. Mark shares his experience in seeing clients faced with the complexity of the technology environment, when bringing in SaaS based propositions, localisation policies which affect cloud infrastructure that many clients in the Middle East market may not have experience in and data residency regulation which Fintechs may not be familiar with.
Looking ahead to watch the future holds in this vertical, Mansour predicts three big growth areas. Firstly, the infrequent fraudulent behavior whilst not reflective of the wider market has shown the potency of underlying data, being able to review and understand anomalies. The ability to pull assets from ERP systems to have clean data and uninterrupted data feeds,
Secondly Mansour suggests significant growth across both payables and receivables financing. whilst impacted over the last couple of years through the way government COVID Relief schemes have worked, has supported the economy as a whole. This will lead to significantly more financing in the longer term.
Finally Mansour sees the trend of consolidation continuing
We are seeing consolidation in the market, I think there's probably still more to come. But I think it's a positive for the market, because what we're going to see is more entrants coming in with more money coming into the market to develop these solutions for our customers.
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