The world of digital finance has been evolving quickly and has found a number of different applications worldwide. Highlighted by the report from Nesta and Cambridge University “Understanding Alternative Finance”, the sector includes different types of online investing: not only consumer loans and equity capital but also working capital.
In fact, a promising application of digital investing is invoice finance, that is companies raise working capital by lending against unpaid invoices. Investing in invoice finance is something that has been around for long time, mainly offered to small businesses in need of working capital from banks. However the market is not regulated and therefore there are no best practices or guidelines to follow. In the UK, a research highlighted that, as a consequence, the process of invoice investing is quite costly due to many hidden costs and fees, such as those for handling paperwork.
Moving this process online can make it far more efficient and transparent: it has been estimated that the cost of invoice financing has been cut by half in some cases. This has been leveraged by players that entered the digital finance market with invoice trading as their specialization. In 2014, in the UK, this sector’s size was of about £270 million and its average growth rate estimated at 147%.
As it has been observed in many other sectors, moving investment operations online has resulted in greater efficiency and increased transparency. Since 2009, Crowd Valley believes that we are witnessing and actively contributing to a paradigm shift in the financial world, which will become more transparent and inclusive.
Dunkley, E. (2015). Hidden bank fees land UK business with £425m bill. FT.com
About the author - Irene Tordera
Born and raised in Milan, Italy, Irene is an International Business graduate, with a strong interest for innovative ideas that can simplify our lives.
During her studies, she co-founded an online community for sportspeople and worked in marketing positions at Ogilvy & Mather Advertising and at the European Business Angel Network, in Brussels. She is a passionate blogger about crowdfunding and the startup ecosystem.