The use of data and analytics has enabled Citi to expand its borrower base in the supplier finance industry in India, said Mridula Iyer, Head of Treasury and Trade Solutions (TTS), Citi Asia from the South, to Shritama Bose. The creation of new umbrella entities (NUEs) should help boost innovation in the business-to-business (B2B) segment, she added. Excerpts:
India’s digital payments ecosystem has evolved dramatically over the past decade. While we know the advancements in consumer payments, have businesses been as nimble in adapting their systems to the changing scenario?
Digitization is now at the heart of business strategies. This goes beyond cost savings, which companies previously focused on, and the focus is now on the efficiency of their sales and distribution processes as well as sales promotion, including how they offer experience to their customers. Companies today are very open to taking advantage of technologies like API and the use of new channels like UPI, QRs, NACH, etc., in order to digitize their engagement with the whole ecosystem.
In the pandemic, companies that had integrated digital into their core strategies benefited more than companies that were just starting their digital journey. Citi’s own experience is that over the past few years we have tried to support companies in their entire digital transformation. During the pandemic, it was easier for our customers to be up and running as soon as the lockdown was in effect because they were well integrated with the bank and had all of their digital solutions in place. In our experience, banks are increasingly becoming digital advisors to companies in their digitalization journey.
The payments space in India has become a place where everyone wants a piece of the pie. As licenses for NUEs are issued, how do you see the landscape changing? Did you also apply for a license?
The NUE is a very interesting and innovative initiative and we can say that India is now leading the pack in terms of digital solutions, compared to some of the developed markets, which are trying to emulate what we have been doing. Despite this, there is room for many more actors and solutions for us to accelerate the pace of digitization. NUEs will bring much more innovation to the payment system. Data will be a very big part of how these players build their products. But even beyond data, NUEs will have ample opportunity to work on new payment solutions, especially in the area of business-to-business (B2B) payments. It will be interesting to see how this space evolves.
Citi, like other foreign banks, has traditionally avoided lending to very small businesses in India. Do you see this changing with the way data and analytics capabilities evolve now?
Definitely yes. When I look at the example of Citi, we have dedicated business segments that serve the banking needs of MSMEs, partnership and owner companies and limited liability companies. In addition, we manage a strong and successful supplier financing program. We also recently launched a distribution financing program. I think data and analytics are going to play a very important role in funding decisions. With so many data points available and digital repositories like e-invoicing, GST, etc., banks have the flexibility to make underwriting decisions and extend them to a wide range of businesses. The payment data available with us, for example, can help speed up integration decisions, and we were able to expand this program to more vendors.
Large Indian PSBs are investing in the vertical sector of supply chain finance. Does that mean older players like you have to do things differently?
There are a lot of opportunities in the supply chain finance space, as traditionally there has been a lack of credit for certain segments. Even globally, the supply chain finance business represents a $ 3 trillion opportunity and what the banks and other players are doing is less than 10%. Likewise, in India there is enormous reach. Citi has introduced many innovations to our product offering and there are various market firsts that we bring to our customers.
For example, we provide an end-to-end digital platform for supplier finance, seamless paperless integration with comprehensive information available online. So the way we try to maintain our market leadership is by bringing more technological innovation into our product offering. Another way is to use fintech partnerships. We are actively engaged with fintechs to create differentiated solutions in this space, using some of the new technologies.