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These two fast-paced industries, which are posting record revenue growth despite the pandemic and falling financial markets, have more in common than you might think.
Over the past two years, both consumers and businesses have had to switch to online and mobile payments. Even people notoriously conservative towards online and mobile payments had no choice but to embrace them. After all, we’ve all relied on home deliveries for far too long.
Deloitte has estimated that the fintech industry will be worth $213 billion by 2024, and this forecast surprised no one. Frankly, as a fintech expert and professor at Ziggurat Business School, I believe that the potential of the fintech industry is even greater because of one simple fact: most countries invested heavily in Internet infrastructure during the pandemic. Unstable or non-existent internet connection was one of the main drivers of fintech adoption for more than a decade. Also, as people needed to work remotely, they needed to improve their digital skills and financial literacy. All these factors combined will inevitably lead to a higher adoption rate of fintech solutions in the coming years.
Speaking of remote work during the pandemic, hybrid work arrangements seem to have fueled the explosive growth of providers of on-demand payroll and vendor management systems. People had to change quickly to new ways of working and this included a shift to self-employment and entrepreneurship as many companies had to cut many jobs to ensure business continuity. That said, those companies still needed the expertise of those people they had to lay off, but it was impossible to pay them full time. Thus, his expertise was acquired on demand. Managing an ever-increasing number of consultants, salespeople, freelancers, and freelancers was a further challenge for already struggling companies. The administrative burden around onboarding administration, compliance, invoicing and payment automation would mean additional costs that most businesses could not afford. So they turned their eyes to the global on-demand and supplier payroll management systems that flourished during the pandemic.
The supplier management software market is expected to reach $12 billion by 2027, according to The Insight Partners. The global supplier management system market is expected to expand at a CAGR of 12.4 percent during the forecast period of 2019 to 2027. Two major factors are driving the growth of the supplier management software industry Suppliers: The ever-increasing number of vendors and one-stop suppliers. demand and the thinning of profit margins in many industries. These two factors combined push companies to look for reliable automation solutions that can reduce costs and ease the administrative burden.
So what do fintech and supplier management software have in common?
Thin profit margin and independent contractors.
Not only do they have a lot in common, but they also work in symbiosis. Thinning profit margins lead to greater reliance on independent contractors, on-demand vendors, freelancers and freelancers. According to SAP Fieldglass:
The modern workforce is undergoing a seismic shift. Forty-two percent of labor expenditure* is now on external labour: casual workers and service providers.
In addition, the number of self-employed workers globally is estimated at 1.1 billion, or approximately 31.4% of the global workforce. In the US alone, freelancers contribute $1.2 trillion to the US economy each year.
Advanced vendor management systems (VMS) provide automation of billing and payments, some of them like Transformify (disclosure: I’m the CEO) go a step further by adopting the CaaS (business as a service) model that allows the aggregation of payments and the supplier. syndication Simply put, TFY acts as an authorized reseller of services offered by numerous freelancers, service providers, affiliates, one-time sellers, etc. So companies only have one vendor to receive invoices and transfer payments. That said, all these hundreds of thousands of cross-border payments are automatically processed in partnership with payment providers like Payoneer, Revolut, Stripe, etc.
How does this symbiosis work?
It’s a two-way street: growing demand for global on-demand payroll and vendor management software means growing revenue for fintech providers with whom vendor management software vendors partner.
Typically, due to the high volume of payment transactions, vendor management software providers integrate via an API with the fintech companies they partner with. This integration allows freelancers, service providers and sole traders using the vendor management system to seamlessly open accounts with fintech providers. Simply put, vendor management systems introduce hundreds of thousands of new users to fintech companies for free. It is an extremely valuable partnership as the customer acquisition cost (CAC) in the fintech industry is high due to fierce competition. Additionally, these new users are likely to have a higher CLV (Customer Lifetime Value) and extended lifetime as they will continue to receive payments through the vendor management system.
On the other hand, fintech companies are interested in referring new business customers to the vendor management software providers they partner with, as both parties benefit from increased payment volumes and a growing number of of users
Although not obvious at first glance, the supplier management software and fintech industries have a lot in common and fuel each other’s revenue growth. Both industries have great potential in the coming years and are on the radar of many investors, as evidenced by rising valuation multiples and numerous funding rounds despite market uncertainty.