B2B Payments

Expense Management Left Behind By India's ePayments Push

India's demonetization initiative may have sent shockwaves through the consumer and business community, but for FinTechs, the sudden announcement by Prime Minister Narendra Modi in 2016 presented an open door, as customers suddenly had a massive new incentive to adopt electronic payments solutions.

As the impact of demonetization continues to reverberate in the market, investors want to benefit from this shift. According to the latest data from CB Insights, more than $2 billion was invested in FinTechs across Asia in the year's first quarter. Much of that was concentrated in India, which, along with China, holds the continent's only unicorns so far this year.

One of the nation's most recent B2B FinTechs to land funding is Fyle, a small business expense management company that landed $1.1 million from Pravega Ventures, Beenext and Freshworks. Yashwanth Madhusudan, cofounder and CEO of Fyle, told PYMNTS that PM Modi's push toward a digital economy and ePayments has certainly helped the startup gain traction.

But while small businesses and their employees may have adopted electronic payments, the way SMBs manage data on those expenses has remained stuck in the past.

"In our experience, global small businesses understand the value and importance of streamlining expense processes more than [small businesses] in India," he said, noting the cost of labor is higher abroad, forcing companies to be strategic with managing spend. "Also, there is a perception problem. Expense management [in India] has been manual for a really, really long time. So much so that people believe nothing can be done to improve this process."

According to Madhusudan, corporate spend management is an issue of data. With ePayments on the rise in the market, access to payments and financial data is increasing. But today, small businesses continue to rely on human talent – not automated technologies – to manage that information, particularly when it comes to data entry.

The continued reliance on manual data input, coupled with India's relatively low adoption rate of cards (compared to other jurisdictions in the world), means expense management continues to be a headache for SMBs, said Madhusudan – even though cash is largely out of the picture.

As India's FinTech industry strengthens, however, a shift appears to be on the horizon.

Another B2B expense management company, Happay, said in 2016 that demonetization has heightened demand for cards among business payers. The firm's cofounder and COO, Varun Rathi, reported a "sudden spike" in card orders and activation requests for the company in the days following PM Modi's announcement.

More recently, last February, the nation's RBL Bank announced a partnership with Rupay and Oxigen to create a card-powered expense management solution for companies, enabling employers to provide workers with a debit card to manage their spend.

Despite employers' habit of manual data entry and paper-based expense management, Madhusudan said an increase in FinTech options for the small business community is gradually leading to adoption of digital, automated solutions.

"Businesses don't struggle with adoption if the product is great," he said. "Product adoption depends on how easy it is to use for employees, which is where conventional workflow approach breaks."

Thanks to demonetization, India's adoption of FinTech in the corporate and small business scape may be a bit unique. Regulatory pressure and the proliferation of FinTech innovation continue to drive adoption of technologies; indeed, Madhusudan said demonetization policy was a "huge driver" for adoption of Fyle's solution, particularly as ePayments proliferate among consumers, and then into their professional lives.

"Ten years ago, transactions were not digital. Today, they are. I can buy a flight or pay for Uber with a click," he said. "The employee now expects her organization to provide a system that makes expense tracking as easy as using Uber or paying with a click."

Despite the unique characteristics of India's FinTech and payments market, corporate expense management in the country looks much like it does everywhere else in the world – and faces many of the same problems, said Madhusudan, who added that employees are critical to the B2B FinTech adoption journey, especially when it comes to T&E.

"Expense management in general, whether from an India point of view or a global one, has always been seen as a workflow problem," he said. "It depended on a fair amount of manual work for both the employee as well as finance [departments]."

Financial executives require enhanced employee spend control and visibility, but if a solution is not easy to use, employee adoption won't take off.

"Finance [executives] expect better visibility and control from a policy point of view," continued Madhusudan. "But this is dependent on employees submitting bills on time. This is where the challenge is: Most employees don't submit bills on time.

"From an employee's point of view, she needs a simple process without any manual data entry, and something that doesn't take too much of her time," he added. "From a company's point of view, policy compliance is very critical, along with control, visibility into spending habits and, more importantly, the ability to detect anomalies."

Traditionally, these two requirements can be conflicting.

"In the conventional approach, the company asks the employee to fill out 15 different fields to get additional information," explained Madhusudan. "No employee would feel great about data entry."

Fyle targets this point of friction by focusing on ease of use, automating data extraction and integrating the tool with existing business platforms like Microsoft Office 365 and G Suite. If employees' needs are met, said Madhusudan, companies' expense management goals will be met, too.

"Our belief is that expense tracking is a data problem, and we are solving it with an employee-first mindset," he said – i.e., "make it extremely easy for the employee, and the rest of the workflow can be completely automated."



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