M1Xchange a digital platform, having robust Information Technology infrastructure and strong legal framework is a preferred choice for most of the segments of financiers. It has also aligned with the highest number of financiers so far, said Ramesh Bisht, Chief Finance Officer, M1Xchange, in conversation with Rashi Aditi Ghosh of Elets News Network (ENN).
1. Give us an overview of your products and services.
M1Xchange is a market place where banks bid for financing of receivables of Micro, Small and Medium Enterprises (MSMEs) and basis the best bid the MSMEs will get the payment instantly. Payment from the large corporate will be collected on due date by the exchange. The banks bid for rate of interest basis the credit rating of large corporates and this enables the flow of funds to MSMEs at rate of interest applicable to their corporate customers. This end to end process of invoice hosting, approvals from buyers/suppliers, bidding and settlement of funds is managed by M1.
M1Xchange does one-time documentation including Know Your Customer (KYC) with all participants and rest of the process happens digitally. It provides a secure and easy to operate platform to all participants which gives them confidence while they are transacting on it. Features like OCR technology, digital signing facility, dashboards, reports, alerts and notifications enhances the user experience of its participants.
The best practices followed in industry have been implemented on the platform that makes the process robust in legal parlance. The ease of usage of platform within legal parameters is the key objective followed on M1Xchange.
Banks and their teams have adapted to the digital way of financing on M1Xchange. They are enjoying the growth in their business without having to worry about Client Relationship Management and back end paperwork.
2. Tell us about the significance of TReDS (Trade Receivables Discounting System) in the BFSI sector?
Financiers are a vital part of TReDS, who have the task of bidding on Factoring Units (which have Invoices or ‘Bill of Exchange’ as underlying instruments) that have been uploaded by the supplier and approved by the buyer. The financiers bid on the ‘factoring units’, giving suppliers a choice to select the most favourable bid to receive funds.
With M1Xchange acting as the trade receivables service provider, financiers get the opportunity to get quality assets in the MSME space across a wide geography in minimal time, cost and effort. Financiers can also bank on this Mynd’sTReDS platform since it allows them to participate in an evolving market scenario that’s increasingly being driven by new Financial Technology initiatives and solutions.
Further, RBI has notified all transaction on TReDS to qualify for Priority Sector Lending which makes it a credible source to build quality PSL books at lower cost. Being accessible from any part of India, it is easy and cost effective for banks to operate & scale up on M1Xchange as they can set up a small central team to build high value portfolio & meet their PSL targets.
M1Xchange being digital platform, having robust IT infrastructure and strong legal framework make it preferred choice for all segments of financiers and have signed the highest number of financiers so far.
3. What role does your brand portray to ensure the flow of funds to micro, small and medium enterprises (MSMEs)?
MSME contribution in India’s GDP is 40 per cent (approx).It plays a crucial role in generating employment opportunities. While this sector has a lot of potential, one of the major hurdle for its growth is the lack of working capital.
M1Xchange addresses this challenge and acts as a convenient platform for MSME’s to get their bills discounted. Bills raised by MSMEs are submitted digitally on TReDS platform and approved by large corporates digitally. Banks or financiers bid for discounting the invoices 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.
The shortening of payment cycle and the smooth flow of liquidity through the platform will ensure that MSMEs do not lose out on business opportunities due to the shortage of funds. The cost of funds will be reduced for MSMEs’ as banks will be bidding basis the risk rating of a corporate. This entire concept is without any collateral and recourse to MSME which is why, it is quite an attractive proposition for MSMEs.
On 24th Oct 2017, Ministry of Finance and other Senior Officials from Department of Financial Services (DFS) in a press conference announced, the compulsory registration of PSU on TReDS in 90 days. While this step will help Financiers build volumes, it will also benefit MSME suppliers who are supplying goods and services to these PSUs.
The response from MSME’s has been phenomenal as they are passing on risk of collection from large corporates to the banks acting as financier on the platform. There have been instances where MSME’s have been able to expand their business with large corporate as the payment of their invoices is released instantly. They love the concept of one time on boarding and managing the entire lifecycle of transactions in digital mode with auto payment in their bank account. They are the happiest customer in the entire ecosystem. The MSME’s are approaching their corporate customers and are requesting them to join the M1Xchange.