StanChart’s SOLV will prove to be a digital trust model for Indian MSMEs

As per the National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office, Ministry of Statistics & Programme Implementation during the period 2015-16, there were 633.88 lakh unincorporated non-agricultural MSMEs in the country engaged in different economic activities. According to the survey, the MSME sector has been creating 11.10 crore jobs in the rural and urban areas across the country. The sector currently adds over 29 percent to the country’s GDP.

The MSME sector contributes to about 45 percent of the manufacturing and close to 40 percent of the total exports of the country. They are a catalyst for India’s export pipeline. To be able to sustain this role and defend its share in the international markets, MSMEs should remain on top in the global competitiveness index. They should adapt and update in the light of changes in technology, demands, emergence of new markets, etc.

There are many financial institutions (FIs) that have dedicated resources to tap the MSME market and there are many coming up to focus and solve the challenges faced by the sector. The London headquartered Standard Chartered Group has launched Standard Chartered Research and Technology (SOLV), a B2B platform for MSMEs. “Through this open, inclusive, diversified platform, MSMEs can discover & connect with suppliers, buyers and peers for their growth. They also get access to on-demand financial services and business solutions,” says Nitin Mittal, CEO & Board Member, Standard Chartered Research and Technology.

Despite rapid advances in technology in various sectors of the economy, the MSME sector has not been able to harness technology for growth. SOLV can help 60 million+ MSMEs in India and transform the way they do their business through a marketplace platform. We are building a conversational platform that leverages concepts of Blockchain, AI, ML, API and Microservices. The minimum viable product (MVP) will be ready by September. Then, will begin the beta testing with select clients. The final product will be launched in the second half of 2020.

SOLV is a born in cloud venture. “Being a startup, we can’t have an expensive licensed based technology stack. It will be open source. We have partnered with Amazon as our cloud service provider. We will be using open libraries, open capabilities. The stack will have API gateways, standard Java technology for workflow creation. The Blockchain version is also open source. The investment in technology will not be much. Our real investment will be in attracting the right tech talent,” says Mittal.

SME – The market study
A market study was conducted under the leadership of Mittal, across different segments in the MSME sector. “There are three major findings. Firstly, many platforms have been around for quite some time serving this market. While there are marketplaces that enable B2C MSMEs to sell, there are hardly any avenues for B2B transactions for MSMEs. SOLV is trying to establish a trust based model over a digital platform. Secondly, we are solving the problem for facilitating the on demand transactional financing required by the MSMEs, which is their real need and not necessarily long term capital alone. Thirdly, our study shows, over half of the energy of the MSMEs is spent in operational processes. We are making it more simple, repeatable and less manual for them,” says Mittal.

Leveraging upon India stack and other open APIs
The India stack will be critical on how MSMEs are onboarded, verified and the credit modeling can be done accordingly. It will be help convert data into inferences and understanding the entities in a much better way.

SOLV will verify and reference data about MSMEs from the following data: KYC, bank and financial statements, ITR, GST filings, social profiles, data from payment companies. SOLV is also exploring to partner with companies who would have psychometric data, which covers the behavioural aspects. The company is planning to partner with over twenty five APIs – either directly or with aggregator of sorts.

The SOLV platform will have a cloud / app first approach. The customers will be underwritten based on the loan amount / tenure. The checks will be based on how big the loan and tenure is. “We will route the MSME to the appropriate FI based on the data provided. This is unlike other platforms, which provides multiple options, comparisons and confuses the prospect MSME,” informs Mittal. At the most, two options will be provided to the MSME on which FI would they go for. The loan contract will be between the borrower and lender, while the relationship of the MSME with SOLV will continue. SOLV will partner with large FIs – banks, NBFCs, specialised NBFCs and MFIs.

The SOLV platform will have multiple technologies – Blockchain for conversational commerce; AI\ML for credit modeling. Overall it will have an API and microservices architecture. The concept of conversational commerce involves relationship and reference based business relationships resulting in commerce. A lot of business relationships exists on entities building trust after transacting over a period of time and then also referring each other to third parties. Some relationships may work well, some may not. SOLV will provide verified ratings of all the MSMEs registered on the platform. This replicates the personal trust based model over a digital platform. A referral network will also be created for conversations for potential business deals. Blockchain and NLP helps to conduct transactions in a digitally traceable immutable contract.

Compliance is also a big painpoint for MSMEs. “SOLV will tie-up with multiple partners like ERP and dealer management system providers to help in the daily transactional capability. The APIs of these tools will help MSMEs stay compliant either by reminding them or maintaining the data in a particular format,” informs Mittal.

Overcoming the logistics and warehousing challenge
One of the major challenges of the MSME sector is exchanging of sample products, especially when the entities are located in geographically disparate locations. “SOLV will create a marketplace for logistics services players, warehousing providers, for seamless business transactions. We are also partnering with commercial insurance service providers. Currently, the claims are disposed with delay and are highly paper driven. We will smoothen this process digitally,” concludes Mittal.