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Benefits of Financial Ecosystems: Maximizing Growth Opportunities

By Sebastian Kreis - Xepelin
Co-Founder and CEO


By Sebastian Kreis | CEO - Fri, 09/08/2023 - 11:00

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It is common in the business world to distinguish between two types of companies: there are small and medium-sized enterprises (SMEs) and large corporations. SMEs, which make up 99% of all businesses in Mexico, face the greatest challenges to survive year after year. That amounts to over 5 million businesses, which struggle to manage their operations. Moreover, inflation and rises in interest rates have had an adverse effect on a significant majority of SMEs, leaving some in dire financial straits and increasing their risk of falling.

However, corporations have achieved a certain stability and reputation due to their track record. Therefore, corporations are viewed as a lower risk than SMEs, which makes it easier for them to find tools and solutions tailored to their needs and access preferential financing conditions. 

It's as if corporations and SMEs exist in two different universes, as there is a lack of access to technological tools, customized services, and financing options. However, it should be analyzed as a whole network of companies that drive the growth of others by providing essential inputs for their operation.  

Fortunately, we are seeing a change in the fragmented panorama, with the beginning of the financial ecosystem revolution after years of waiting.

What Is the Impact of Business Networks?

It is a known fact that economic growth across Mexico is uneven. This year, there seems to be a positive economic outlook in the northern part of the country, facilitated by the opportunities nearshoring offers, particularly for sectors like industrial, automotive, manufacturing, and maquila. To achieve the estimated national growth of 3% by the end of the year, companies in the region require suppliers and partners who can quickly meet the demand with the best quality. As these SMEs are compelled to meet the necessary standards, they accelerate their growth.

This is where we start to understand the significance of the interconnectivity between small, medium, and large companies. They rely on each other to attain a mutual objective: increased sales and profitability. These potent business networks are introducing a novel approach for companies of all sizes — SMEs and corporations — to engage, thereby unleashing a plethora of opportunities for mutual development. The collaboration between these two categories of enterprises embodies a mutually beneficial situation.

This extends beyond nearshoring or temporary solutions. All companies, especially large ones, benefit from a robust supplier and partner network that they can rely on. This helps them establish trust in their operations and minimize supply chain risks. 

Likewise, small businesses that are part of such large chains can enhance their reputation in the market. This is when the explosive growth of SMEs, which may have paused operations had they not served their major revenue generators, is stimulated.

A concrete illustration of this can be found in a McKinsey study that revealed that companies that regularly collaborate with their suppliers and partners achieve higher growth rates, lower operating costs, and higher profitability. Therefore, this collaboration entails more than just a cordial relationship.

Facilitating Financial Inclusion 

In reality, it is unlikely that all businesses can access the same financial products with identical conditions and features. However, what if the benefits of large corporations can be expanded across their entire network? 

Large companies providing SMEs with the necessary resources to not just serve them, but also to enable their growth is when the magic happens. Thus, corporations contribute to the economic development of their allies.  New digital platforms and tools are emerging to meet real needs, considering both parties holistically and taking into account their economic concerns. 

To boost sales, large corporations look for technology to streamline interactions with their suppliers, improve transparency and communication, resulting in a more predictable and robust supply chain. However, considering the benefits to their suppliers, they require automated payment systems that improve financial efficiency and ensure timely payment, enabling suppliers to focus on improving their products and services.  This is where the story becomes a reality, thanks to the power of the network. Their interaction solves needs that are beneficial to everyone.

Technology to Boost Network Expansion 

The power of data and artificial intelligence is transforming the way businesses function and make decisions. In recent years, new technologies have stimulated the growth of financial ecosystems. Data-driven insights further enhance the power of ecosystems, allowing tailored benefits to be provided to all participants. Knowing the business situation in detail in real-time is crucial for making positive strategic decisions.

When it comes to financial data, being able to see the operations of an entire network of companies, including customer and supplier invoices, provides insight into the health of the ecosystem. This helps with forecasting future growth or cash flow breakdowns and instills confidence in the ability to secure the best financing conditions based on a healthy long-term turnover flow, its trend, and the likelihood of payment.

The large network of companies can lead to the development of customized solutions depending on the risk of each invoice and the relationship between the customer and supplier. The data itself simplifies the visibility surrounding potential growth opportunities, or, alternatively, significant risks.

By acknowledging the potential of these networks and investing in their development, we can create multiple opportunities for growth, innovation, and prosperity.  Now is the time to invest in the overall growth of the network to create a robust and sustainable business environment. 

At Xepelin, our goal is to take the next step by using cutting-edge technology to transform conventional practices. By utilizing ecosystem data at scale generated through this network of nodes connecting small, medium, and large companies, our aim is to democratize digital financial services and drive the growth of every business in Latin America.

Photo by:   Sebastian Kreis

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