With all that fintech innovation all over the place… one would think that everything has been solved. Not so fast, muchacho. There is still plenty of things to do. A lot of different parts of the financial service industry are still widely inefficient. Some are still huge problems, in dolar terms, to solve. And some companies are naturally quite motivated to fix it. Fintech Review asked a few questions to Noam Mani, CRO and Co-founder of Quartix, on the future of supply chain finance.
Tell us more about Quartix. What is your elevator pitch?
Quartix helps mid-market industrial clients pay their vendors later.
We focus on manufacturers, distributors and importers with sales volume of $25M-$1B as clients.
What problems are you solving with Quartix?
The fundamental problem we’re solving is cash flow and working capital management.
From a client perspective, paying a dollar later to a vendor is as impactful as collecting a dollar faster from a customer when it comes to improving cash flow and working capital.
However, while there are many ways a client may collect faster from its customers (AR factoring, cash discounts arrangements or even p-cards come to mind), there are currently no off-the-shelf solutions to help those mid-market clients pay their vendors later.
We do just that.
Worth mentioning that Fortune 500 giants have access to an advanced specialty-finance product called Reverse Factoring. This product helps those giants pay their vendors later. This product is offered to them by large universal banks (BofA, Wells Fargo, Citibank etc).
These large banks do not offer Reverse Factoring to mid-market clients. That’s because these clients are just too small and uneconomical for those big banks.
In a nutshell, we took the Reverse Factoring product and improved it to offer our client more ways to pay vendors later. We simplified it to provide a plug & play implementation experience. And finally unlocked it to those smaller mid-market clients.
What is your background and what is the story behind the company?
I’m originally an engineer and a physicist.
I began my career at an elite technological unit at the Israeli Defense Forces, and finished my military service after more than 6 years in service. When I completed my military service, I joined Israel’s top management consulting firm. I then consulted top management and board teams of large Israeli and international companies. Mainly in the finance and technology spaces.
I always had the entrepreneurial bug in me. So when I left that consulting firm I was searching for my next big thing. At the time, Dror Polak, my current co-founder, managed Citibank’s trade finance and treasury services unit at Citibank Israel, after a long international career at the bank.
Dror was also looking to leave the bank and start a Fintech company in the SCF space. Together, we identified the huge gap in the mid-market SCF space and co-founded Quartix. Our idea is to democratize the SCF space by providing those mid-market companies access to advanced Fintech solutions just like the big Fortune 500 giants have.
How is trade and supply chain finance evolving?
Generally speaking, the trade finance universe is broad. But like I said most of these products are focused on helping the client collect its receivables faster or finance its inventory. While the payable side of the balance sheet is thinly covered.
Also, most of the innovation in the trade finance space is centered around the small businesses space (where clients are relatively easier to acquire) or on the very large ones (where the ticket size is enormous).
The mid-market is neglected today when it comes to innovative trade-finance products. Tech companies shun away from it due to difficult client acquisition. Meanwhile, banks struggle to develop innovative trade finance products in-house.
Supply Chain Finance
Before discussing innovation in the SCF space, it’s worth mentioning that Supply Chain Finance tends to be an umbrella term for two different products. It hosts both Buy Now / Pay Later products, as well as products based on a Reverse-Factoring model.
Via a Buy Now / Pay Later product, a client can pay for its purchases using 3rd-party funding, and pay back down the road.
Via a Reverse-Factoring product, vendors of the client can sell their client’s receivables to a 3rd-party to collect their cash faster. This makes it easier for that client to negotiate extended payment terms with its vendors (like turning Net 30 to Net 90 or even Net 120).
So both products help a client to pay later, but they do so in a completely different way.
In the mid-market today you may sporadically find lenders that offer Buy Now / Pay Later products (these are mainly manual / paper intensive). Very few providers offer these mid-market clients a Reverse-Factoring solution.
We see the Buy Now / Pay Later product and the Reverse-Factoring product as highly synergetic, and offer a fully digital, one-stop-shop (technology infrastructure + funding) solution to mid-market clients that includes both the Reverse-Factoring and the Buy Now / Pay Later products.
This maximizes the value to the clients by providing it different ways to pay its vendors later, based on the specific situation it has vis-a-vis each of its vendors.
Any innovation in fintech more broadly that you are really excited about?
I’m very excited about the increase in bank / fintech collaborations.
There are many big problems that banks of Fintechs operating independently would struggle to tackle efficiently. While if a bank collaborates with a fintech, many synergies are unlocked and the clients end up receiving a very compelling value proposition.
Banks and Fintechs can complement each other very well. In the mid-market for instance, banks excel in client relationships and access to low cost liquidity. Meanwhile Fintechs have an edge in developing engaging technology in a fast and efficient manner.
Combining these advantages makes a lot of sense to me and I enjoy reading success stories of that sort.
Any plans for the future or product roadmap you want people to know about?
I can’t really disclose our product roadmap. But I can say that in my view, there’s an enormous opportunity to deliver trade finance innovation in the middle-market directly and via Fintech / Bank collaborations.
Trade-finance product innovation has penetrated the small businesses landscape as well as the Fortune 500 one. However, the mid-market segment is still lagging way behind. There’s tremendous value there given the fact that there are over 100,000 mid-market businesses in the US alone.