B2B Payments

 RedCloud on How OCR-Driven Payments Benefit Supply Chains

Red Cloud Technologies

Supply chains can get bogged down in paper invoices and cash payments, especially when unbanked enterprises are part of that chain. Cash reconciliation and invoicing by optics allows invoices to be received, processed and paid in real time. RedCloud CEO Justin Floyd tells PYMNTS that fast-moving consumer goods companies and distributors can leverage the power of application programming interfaces (APIs) to embrace digital payments.

To bring global supply chains into the digital age, look toward optics.

RedCloud Technologies said earlier in the month that it had launched a payment solution, known as Cash Reconciliation & Invoicing By Optics, or CRIBO for short.

The solution allows for global supply chains to digitize cash payments and reconcile invoices in real time. The solution is billed as one that allows fast moving consumer goods (FMCG) firms and distributors to carry out digital transactions while creating and maintaining digital records of payments.

In an interview with PYMNTS, RedCloud CEO Justin Floyd said that bringing digital processes to markets is a critical growth area for consumer goods companies, particularly in emerging markets.

He noted the example of the Asia Pacific region, where consumers buy from more than 30 million stores, compared to only one million in North America, where relatively more commerce takes place online.

He said in that region, firms are only able to physically reach 10 percent to 25 percent of the market, with many firms turning to digital channels to access new customers.

“However,  many of these customers pay offline for these online and offline purchases [through cash and checks], meaning payment friction can add massively to the costs for retailers,” said Floyd, “and those costs subsequently flow all the way up the supply chain, from merchants through to distributors and FMCG groups.”

Currently, as has been reported, 10 percent of FMCG billings and up to 40 percent of their earnings need manual processing of transferred payment information from unbanked and cardless distributors. RedCloud’s new solution aims to systematize the process.

He said that offline or non-digital payments can translate into missed payments for products and lack of visibility for transactions, all of which negatively impacts cash flow.

In addition, many smaller distributors are unbanked and do not wield cards for payments across various geographic corridors. Floyd noted that this is especially true where there is poor banking infrastructure in place, or where there are high and complex banking fees. Banks might primarily choose to serve the larger corporate accounts and consumers which leaves the middle-market SMB segment heavily underserved.

“Banks are also limited to the customers they can reach through physical branch/ATM presence, and therefore a ‘more digital’ approach to onboarding and servicing is required in order for them to reach the smaller distributors and merchants,” he told PYMNTS. Against this backdrop, SMBs pay their distributors offline, and distributors use non-digital currency to pay FMCG groups.

Technology can help modernize the process, he added, as the mobile phones are ubiquitous and feature advanced imaging technology. The imaging technology can digitize paper-based documents such as documents and receipts. He said the RedCloud technology can allow invoices to be instantly scanned, uploaded and paid in a single click. The invoices are “matched” to payments through application programming interfaces (APIs), said Floyd. Suppliers are notified of real time transfer of funds.

“This creates an instant, secure data trail, which means that payments can be instantly reconciled and credit can instantly be built up,” said Floyd. Records of offline payments can be recorded digitally, with payments attached to invoices.

Digitally reconciling offline payments can streamline the customer experience, he said. He also contended that the data presented across the digital processes can allow greater insights into customer buying patterns. He said the platform operates across multiple data points including know your customer (KYC) and anti-money laundering (AML) checks.

Asked about near term roadmaps, Floyd said that the company will focus on countries that remain largely non-digital in terms of payments — yet have a large and rapidly growing mobile and internet penetration.

“Many of the market across Latin America, Africa and SE Asia including India and Pakistan have bank penetration rates of less than 30 percent,” he said, “ meaning card payments also fail to penetrate.”

Non-digital means such as cash, coins and check are the most common payment methods, however, they have large mobile phone adoption and rapidly increasing internet penetration which makes them ideal markets to move beyond cards and point of sale (POS) — and straight to a mobile digital payments platform.

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