Many new models of non-bank lending have emerged over the last few years that rely on funding buyer-approved invoices with third-party money. Some models have generated respectable volume, but they still pale compared with total B2B transactions.
The problem is that B2B lending is fuzzy, given how difficult it is to assess risk for all counterparties to a trade. That’s why traditional supply chain finance (SCF) starts with the buyer as the central actor. By leveraging the payment approval process to provide early payment on an invoice obligation to the buyer’s supplier, the buyer typically provides a guarantee that helps mitigate the risk of post-confirmation dilution.
But taking this a step further — funding the invoices that have been verified but before they have been approved for payment — adds another layer of risk. Invoices verified (i.e., only receipt confirmed) can suffer from dilution, where some deduction is made off the invoice value.
Dilution, along with fraud, is one of the top reasons pre-approval financing has failed to take off. Most SCF platforms do not play in this space or have failed with their attempts. Some lenders and fintechs have tried to attack this space but realized that, in spite of new data sources, real-time underwriting, and operational processes to manage risk, pre-approval invoice lending is just hard.
Previse, however, thinks it has cracked the pre-approval invoice finance nut. The London-based vendor has developed an AI-based instant invoice payment solution called InstantPay marketed to large enterprises and their supplier relationships. And while it thinks of itself more as a payments play than a trade financing product, Previse’s solution takes aims at the dilution problem in a way few SCF platforms have matched.
This Spend Matters Vendor Introduction provides a company background and an overview of Previse’s solution set.