Product proposition
Innovative solutions that have been developed include the following two examples:

Virtual accounts. These are shadow accounts to the primary physical banking account; each virtual account can be unique to a relationship. Introduced by fintechs, virtual accounts are now being offered by banks as well. The supplier can create multiple virtual accounts for their primary bank account and dedicate each one to transactions conducted with one entity. These accounts only collect the required information for each transaction and pass funds to the underlying bank account. Virtual accounts help automate payment reconciliation because every payment is automatically tagged with the transaction details. And with a fixed fee model, they reduce transaction costs, especially for large payments, while helping to maintain the customer experience of engaging with the entity.

Virtual cards. Boosted during the pandemic, virtual cards are being touted as the next major trend. They are being offered by fintechs in partnership with banks. Similar to a credit card in the features and the way they work, virtual cards only differ in the lack of a physical card. They are suitable for companies when teams are working remotely or when issuing a one-time allowance. Virtual cards are cost-efficient and allow for online payments with enhanced security thanks to the lack of physical access and therefore greater control. With the rise of B2B e-commerce, digital payments are registering sustainable growth in payments such as taxes, utilities, card payments, and subscriptions.

Digitalizing the value chain
Four types of processes have been the focal point of digitalization:

Invoice automation. Invoice automation helps automate invoicing of the recurring transactions. To a supplier, the solution offers the option of uploading a single file with the vendor information which then generates invoices, sends these invoices to the buyers, triggers reminders for payment, and provides analysis on the collection trends. To a buyer, the solution offers the option of automatic processing and paying recurring invoices, in addition to assisting with accounting—all within a matter of minutes rather than the few days it takes for manual processing.

Factoring automation. This is a crucial step for sustaining operations for a small or medium-size enterprise. Entering data, assessing the risk, and processing invoices in less than 24 hours for service efficiency can result in errors and financial losses. To mitigate these risks, fintechs have designed automated solutions where software extracts the data, reads and processes the uploaded invoices, identifies fraudulent invoices, and assesses the risk. This improves accuracy, underwrites the right risk, reduces turnaround time, saves on labor costs, and protects against fraud while giving the business greater access to working capital.

Payment automation enabled by platforms. These processes integrate users’ accounting system with bank accounts to create efficiencies. The platforms enable automation of payments, collection, reconciliation, and dashboarding to simplify the process. They also allow businesses to configure approval workflows to eliminate the need for manual handoffs, reducing the turnaround time for payments.

Do-it-yourself (DIY) platforms. DIY platforms enable the management to manage their business financial interactions, primarily with respect to cards. This includes features that enable employee card issuance, management, payment of bills and dues, bank account management, bulk uploads, vendor payments, and other enabling functionalities.

Platform-enabled customer acquisition
The following solution is a stepping stone to other similar initiatives:

Vendor and customer acquisition platforms.
Creating a repository of vendors, although vital for augmenting a business, is a manual activity with limited added value. Its recurring nature has elements that can be standardized. To this end, there are vendor management solutions with details about vendors that facilitate vendor and customer acquisition for the buyer or supplier, enabling real-time bank account verification, automated know-your-customer (KYC) checks, and vendor review.

Regulatory and government interventions

Supporting businesses in this digital transition will require active participation from the government and other central bodies to ensure the inclusion and availability of equal opportunities for all entities.

Simplifying access to credit. Small, medium, and emerging large companies make significant contributions to GDP, in addition to creating jobs for semiskilled and unskilled workers. However, the sector faces a constant credit challenge. To ease this, the government introduced PSB Loans in 59 Minutes, bringing partner banks together on one platform to lend up to INR 5 Crs to micro, small, and medium-size enterprises with minimal documentation. Usually, the banks approve the loans within eight days. Fintechs are also offering unsecured credit to SMBs, leveraging technology and reducing reliance on informal and expensive borrowing.

Access to government digital initiatives and related infrastructure. A lot of public infrastructure has been developed to digitize business spends. The Bharat Bill Payment System and the Unified Payments Interface in 2016 were stepping stones to digital payments in India (see figure 7). In 2017, the Goods and Services Tax further enabled digitalization as all business entities above a certain turnover are now required to upload e-invoices into government portals. Solutions such as Account Aggregator and OCEN are opening up access to central resources for information to enable processes such as credit underwriting. Account Aggregator enables access to financial information, and OCEN helps democratize business credit by providing access to verified information for simplified underwriting. This helps make technology more convenient beyond the purview of big tech companies such as Amazon. Launched in 2021, the Open Network for Digital Commerce (ONDC) will provide open networks for the exchange of goods and services to all types of businesses.

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