Business model flexibility became a necessity for survival for many businesses in the wake of the pandemic.
Whether that meant a small brick-and-mortar shop embracing curbside pickup and online ordering, or a large manufacturer pivoting from making clothes to making personal protective equipment (PPE), the ability to turn direction as quickly as possible became emblematic of a collective relief effort, and an individual effort to stay in business.
It's in this context that many FinTechs have introduced new products and services to help businesses with their business model adjustments. But for one FinTech, InstaPay, the opportunity found within the pandemic also involved a new direction.
In an interview with PYMNTS, the firm's chief operating officer, Sam Bokher, said the surge in eCommerce volume offered a chance for InstaPay to expand its factoring offering beyond its flagship operations of connecting transportation and trucking businesses to capital. He explained how real-time payments capabilities have opened the door even wider to broaden the application of its financing technologies.
From Truckers To Amazon Sellers
InstaPay launched as a factoring company for the transportation industry, financing receivables for truckers and other businesses in need of capital to manage cash flow gaps. But waiting to receive payment can be a significant pain point for businesses in all sectors, and with the pandemic driving up eCommerce sales volumes, Bokher said there was a chance for the FinTech firm to broaden its customers base to target sellers on Amazon.
But the company couldn't simply copy-and-paste its technologies and workflows from transportation to eCommerce.
"Companies in the transportation industry have to requests funds," explained Bokher. "We review their funding requests, which happens pretty fast."
For Amazon sellers, though, thanks to the platform's application programming interfaces (APIs), a FinTech like InstaPay can wield company data to automatically connect businesses to funding without the need for those vendors to actually request it.
"Amazon doesn't pay really fast, and we have this cash gap we have to finance," Bokher continued, adding that the expansion into the eCommerce world was a "spontaneous" one for the company — yet one whose growth could ultimately outpace that of its flagship transportation factoring offering.
Through automated technology, customer onboarding and finance request reviews for the trucking space can often occur more quickly than if a company were to seek traditional funding from a bank. Thanks to API integrations, the process is even faster for Amazon sellers, which are automatically connected to funds based off of recorded sales before Amazon can facilitate those payouts.
What's been critical to the success of the financing tool, as Bokher said, is the company's adoption of faster payment rails.
"One of the biggest needs — often bigger than the cost of financing — is the speed of receiving the financing," he explained.
The company wields Same Day ACH to disburse funds to businesses, and it is actively exploring the opportunity to adopt real-time payments capabilities, including the Federal Reserve's RTP network when it launches, as well as the implementation of push payments to debit cards to receive funding.
This comes with its own set of challenges, however, particularly when it comes to regulatory compliance.
"There are downsides that come with this because there are always anti-money laundering laws and the risk of fraud," he noted. "You have to be very sure that you want to employ that method of payment with that particular customer."
Collaboration with payment processing partners as well as a solid customer onboarding and underwriting strategy will be essential not only to InstaPay, but to financiers both traditional and alternative, as the need for faster funding grows even more intense to support economic recovery.
Bokher said the company took only about a month to leverage its existing technology and run its eCommerce financing solution in beta mode. As the company works to integrate with other eCommerce platforms like Walmart and employ even faster payment rails, connecting businesses to capital as quickly as possible will be key to InstaPay’s ability to withstand market headwinds.
Speed will also continue to be important for businesses looking to adjust their business models and go-to-market strategies. If the pandemic has taught companies anything, it's been the importance of thinking on one's feet and reacting to ever-changing market conditions — and doing it fast.