What are marketplaces?
Marketplaces are platforms that enable trades to be executed between suppliers and buyers. There are generally two kinds:
- Platforms that enable suppliers and buyers to find each other. This is a form of social networking service which can also include a forum where suppliers advertise their products and buyers advertise their needs.
- Platforms with a larger ambition, which is to provide an environment where suppliers and buyers choose to execute their transactions over the medium to long term because the platform provides convenience and additional services.
Why is trade finance important?
Trade finance can add a significant amount of value to the second kind of marketplace. This kind of platform builds loyalty and engagement with its customers; if the platform is effective, customers will keep returning and keep transacting. Key to their success is the amount of value and convenience that is added to the transactions that are executed versus the charges levied by the platform. Most such platforms include:
- Standard form legal agreements, so that terms and conditions are clear.
- Dispute resolution environments, so that buyers and suppliers can manage disagreements over quality, volume or price.
- Logistics support, so that orders placed across the platform automatically sync with efficient logistics providers to provide a seamless process from factory gate to buyer’s warehouse.
All of these features are a natural part of the marketplace / platform proposition – but the most significant value that can be added comes through trade finance.
The working capital need
Platforms that integrate trade finance solve many issues for suppliers and their buyers. Every transaction involves a working capital need. The supplier has to spend time and money creating products for shipment, whilst the buyer has to wait for products to arrive and then has to spend time and money converting what he receives into cash within his business. The typical time period for these activities is 6 months in most industries; that is it takes 6 months from a buyer placing a purchase order to when the buyer has received the goods and generated cash from them.
PrimaDollar: adding finance to a marketplace
PrimaDollar can add trade finance to any B2B marketplace. Marketplaces specialising in the supply of non-perishable goods can offer payment to exporters at shipment. Marketplaces that involve perishable goods (like food) can offer payment to exporters at delivery. In both cases, buyers can pay later, and PrimaDollar takes the buyer credit risk. Moreover, by integrating our technology, finance can be provided in the name of the marketplace. This is something that we call “Finance-as-a-service” – a new form of white-label arrangement where the marketplace does not have to subordinate its brand and appear as an agent or broker; finance is delivered to clients directly in the name of the marketplace.
Marketplaces are emerging and growing quickly; they will be an important part of the future of global trade. The winners will be the platforms that add the most value to their transacting clients. Adding trade finance is an essential step, and PrimaDollar’s technology is the way to do this.
How can I find out more?
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