In the eighth episode of SME Banking Club Podcast Series, we speak about micro factoring for entrepreneurs in Poland with Marcin Pasenik, Founder & Managing Director at inviPay.
Olena Gryniuk: Marcin, please tell us more on inviPay. You are working from 2015 at the market, right? How many customers do you have at the moment and what is your targeted segment of entrepreneurs?
Marcin Pasenik: Yes, I set up a company in May 2013, and after two and a half year we were able to start our operation activity. This has started for good since November 2015, to be precise, when we have earned our first commission. This was the time inviPay officially started and showed up in the market. Until then we have served more than 50 thousand invoices for the amount more than 160 million zlotys (40 million euros). Today we’ve got near 3000 clients.
OG: So how does micro factoring work? Let’s assume I’m an entrepreneur and want to finance my invoice, which I’ve issued and sent to my counterparty. From what should I start?
MP: Not precisely in inviPay, applying for factoring limit is something that represents typical factoring procedures. In inviPay first that you need is to do is to set up an online account in our application. This should take about 2 minutes, and during this, our scoring procedures will score you. To do this, we do not need to have any documents and application form; everything is done automatically at our website. And after that, the scoring will be finished, and if everything is OK, then you will be allowed to do settlement of your transactions in our system, and your initial limit will be twenty thousand zlotys.
OG: What is the range of your limits?
MP: The start will be 20000 zlotys (5 thousand euros), and currently, we have not more than 500 thousand zlotys (125 thousand euros) per client. But to reach this level, you need to settle during our cooperation rather big amount of invoices and this cooperation need to proceed correctly.
OG: Which criteria customer should meet to get the positive decision?
MP: First of all, and this is critical for us, he must be in business 12 months. It cannot be a business that was born yesterday, some experience in this business need to be in place. The second criteria is to go through our scoring with positive results. To do this, for example, you cannot have opened debts in credit bureau, but it’s not only this.
OG: Which part of the process of underwriting and risk assessment is automated and what is the role of human underwriters in that?
MP: I may say that 70% of our scoring is automated, we are integrated with thousands of data sources, which we are able to analyze in the few seconds and the whole registration process and this first contact with inviPay our new client is rather automatical. The human touch is implemented in after stage when you request the higher limit. Then our Risk Department can ask some additional questions to analyze some documents but not on this first level.
OG: Going by the process to the end – the customer gets approved factoring limit with you. What is the next step – you are signing factoring agreement with the customer? Is it in paper or digital?
MP: It’s totally digital. During the signup process, he gets from us Agreement and the Rule Book. The agreement is the one page, and Rule Book is about eight pages, and he gets them on email. After reading and accepting it, he can go further. So, he needs to notify us that he agrees to the terms and nothing more. This is totally different from typical factoring. The whole setup process and the start of cooperation with us could take a couple of minutes, so our client is able to sign up to our system, go through the process, give us the first invoice and get tomorrow.
OG: So, I wanted to ask how technically customer finances his invoices? This is done via your web page, right?
MP: Yes. We’ve got web application which is fully responsive, so we do not invest into different mobile apps, we rather want to make them and develop our core web app.
OG: What is Time-To-Cash for the customer?
MP: Next business day.
OG: What type of factoring do you provide? Is it domestic or export one? And also, is it recourse or non-recourse? What is happening if customer’s counterparty doesn’t pay under the issued invoice?
MP: As for now, 90% is the domestic recourse factoring. In relation to the second question – what’s going on if the debtor doesn’t pay – we are trying to collect this money from the debtor, and we are trying to do it during the sixty days period after the due date. Of course, on the permission and with the full cooperation with our customer, but after that, if sixty days pass and the money are still not paid, then we back to our customer and ask him for the refund.
OG: You cooperate with two big banks in Poland: ING Bank Śląski and Alior Bank. What is the model of cooperation? ING’s website features a link to inviPay. So, Bank’s customer knows that he is directed to your page for the factoring, right?
MP: Yes, this is an open cooperation based on revenue share model, so not the white label, not with these two banks. We are currently in the process of implementing the third bank, and we hope to do this to the end of this year, and this cooperation will be based on the white label. We see the big opportunity from the white label model especially in customer feeling where he is exactly, so we see how it will be working.
OG: So, this business model – I mean cooperation with the banks – does it make a big part of your business? Is this your strategy now?
MP: I may say it’s not the main part, but it’s important for us. During the setup of our company and the first year of operation, we’ve been on the market without partnering any bank, and we were able to gather quite a big amount of customers. But I believe that cooperation with such party like banks with very good reputation and trustworthy, I assume, that for every startup and small player on the market is the big issue and very valuable.
OG: How much time was needed from signing the agreement for the cooperation with both banks till the implementation of common factoring offer to the banks’ customers?
MP: In relation to ING, it took us seven months to pass the due diligence form the bank perspective. Of course, the risk of compliance was very important for them to score us totally and this took seven months. In Alior case it took us only three months to set up everything. I feel we are very good in this process and equal part for the bank during this cooperation and setup this business together.
OG: Does the process of approving factoring limits differ if the customer comes from the Bank to you? Do you access the data on the customers from the Bank?
MP:No, we don’t gather, and the bank does not possess to us any information due to banking regulations, so the process is the same as for the client from the market, not a reference from the bank.
OG: Marcin, thank you very much for that conversation!
MP: Thank you very much!