This posting in Fintech Finance News provides a brief overview of the problem in collecting money as a small business in the UK, along with a new potential solution to help change the status quo. We have written about this cash flow issue in these pages and have also tracked progress in specific markets like the UK where it is a particularly vexing problem. The pandemic has of course exacerbated the situation, causing severe cash flow challenges in this vulnerable business segment, which has seen a predictable uptick in business failures during the past two years.
‘Two in five invoices in the UK are paid late, and it’s getting worse. Late payments have been an ongoing issue in B2B trade. With 25 million companies in Europe and 86% of them counting less than 10 employees, the lack of cashflow can be disastrous…
Although late payments – and lack of capital as a result – are recognised to be one of the major causes of SMEs failure, especially after the recent shortage of lending to Britain’s small businesses, a permanent and effective solution is yet to be implemented.’
The indicated solution is from a UK startup named StonePay, which on its website advises us that ‘It’s Not a Payment App, it’s a Business Community of Trust offering a Reputation Rating and a Risk Assessment Tool with Limitless Opportunities.’ So while it would at first glance seem like another alternative credit decisioning vehicle utilizing non-state, non-credit bureau data, it is essentially driven by a social media type of commentary and established community standards. We have not had a briefing so we are not exactly sure how it works, but it certainly has some merit on the face of it, since lack of knowledge has always been a trade exchange risk, therefore some information sharing on actual transactional behavior should be welcome, especially for small business.
‘Companies can build their reputation rating and their trust profile. Each business’ reputation report can be shared to guarantee the company’s trustworthiness, or to obtain better credit conditions and improved business terms, resulting in a smoother process and improved workflow of the finance department. A precious tool for SMEs looking to maintain steady cashflow and avoid unreliable payers…
The pandemic weighed heavily on SMEs finances, with 80% of them saying their revenues have declined in the last two years, putting even more pressure on the importance of efficient cashflow. StonePay promises to give the power back to businesses and trading community, shifting from an “external control approach” to an “internal reputational approach” with trust at the core of each transaction…
In just two weeks StonePay reached 100% of their crowd-funding target, a next round of funding is planned for December, followed by the official launch of the app…
Filippo Mazzei CEO and Founder of StonePay says “There is a huge need for B2B businesses across the globe to be able to trust each other and to control their business reputation without having to rely on traditional methods that cost money and cause delays in operations. Our aim is to eradicate late payments, limit risk, and offer the good payers the benefits they deserve!”’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group
