Since this year, both the Internet circle and the financial technology circle have set off a wave of collective transformation from TO C to TO B. This means that although the dividend of consumer Internet has gradually faded, the spring of industrial Internet has just begun. In the context of industrial Internet, some people assert that "all industries in the future will be redone with Internet thinking and means."
The digital upgrading within this industry will inevitably drive the injection of digital financial resources, ultimately forming a resonance effect between industrial upgrading and financial innovation. With the help of the industrial Internet, financial services for the real economy will become a norm. Recently, the logistics industry and logistics finance have staged such a wonderful symphony.
Multi party giants layout logistics finance
Currently, the Chinese economy is in a critical period of transformation and upgrading. Driven by supply side reforms, various industries are undergoing a major transformation with data-driven themes. As one of the fundamental pillar industries of the national economy, the logistics industry will naturally not be an exception.
On August 17, 2017, the General Office of the State Council issued the "Opinions on Further Promoting Logistics Cost Reduction and Efficiency Increase to Promote the Development of the Real Economy" (hereinafter referred to as the "Opinions"), proposing 27 specific measures from seven aspects and deploying relevant work to promote logistics cost reduction and efficiency increase.
In this important policy document, the logical relationship between the three keywords of logistics, data, and finance is clearly and comprehensively explained: "(16) Expand financing channels for logistics enterprises.". Support eligible state-owned enterprises, financial institutions, large logistics enterprise groups, etc. to establish modern logistics industry development investment funds, operate in accordance with market-oriented principles, strengthen the construction of logistics infrastructure at important nodes, and support the development of light asset logistics enterprises applying new technologies and models. Encourage banking and financial institutions to develop supply chain finance products and financing service solutions that support the development of the logistics industry. By improving the research and development of supply chain information systems, achieve internal and external credit ratings, comprehensive financial services, and systematic risk management for upstream and downstream customers in the supply chain. Support banks to explore and expand electronic system cooperation with logistics companies in accordance with the law
Subsequently, multiple giants vigorously laid out data-driven+logistics finance:
(1) As a leader in financial technology innovation, Ant Financial has built a financial ecosystem for small and micro logistics enterprises within the core ecosystem of Alibaba's e-commerce, focusing on the Cainiao logistics system; Outside the core ecosystem of Alibaba's e-commerce, Ant Financial has intensified investment to complete related layouts. Recently, Ant Financial completed investments in two data technology companies in the field of highway freight transportation - Kaijing Technology and Zhongjiao Xinglu.
(2) Manbang Group (the largest vehicle and cargo matching information platform in China), the new industry Internet leader in the logistics industry, is gradually expanding its business field from vehicle and cargo matching to comprehensive logistics service platform, and actively layout nine business groups including logistics finance.
(3) Leading companies in the traditional logistics industry, such as Prolos, Chuanhua Logistics, and Shenzhen International, are accelerating their transformation and upgrading in both data-driven and logistics finance dimensions. For example, Chuanhua Logistics is building a financial ecosystem that integrates payment, financing, brokerage, wealth management, and credit reporting based on its own intelligent logistics information system, relying on rich logistics industry transaction scenarios.
Two major characteristics of China's logistics industry
Although new players are constantly entering the field of logistics finance and product forms are constantly innovating, these changes and innovations must be based on a deep understanding of the industry's characteristics. The description of the characteristics of China's logistics industry is very relevant, as there is a saying in the industry that "large transportation market, small transportation capacity enterprises".
(1) Transportation market: The logistics industry has a huge economic volume. The transportation market refers to the significant transportation demand generated by physical trade, and the corresponding industries have a huge economic volume. According to data from the National Bureau of Statistics, in 2017, the total cost of social logistics was 12.1 trillion yuan, accounting for 14.6% of GDP. As the main force of logistics in China, highway logistics carries 77.5% of the freight volume. As for the road freight industry alone, according to data from the Logistics Finance Professional Committee of the China Federation of Logistics and Purchasing, the total amount of road freight in China has reached 3.5 trillion yuan, with 14 million operating vehicles and a freight volume of 35 billion tons. The number of employees has exceeded 20 million (of which 90% are freight drivers), and logistics companies have exceeded 7.5 million households.
(2) Small enterprises with transportation capacity: small, scattered, numerous, weak. "Transportation capacity small enterprises" refer to small and micro logistics enterprises that provide the actual transportation capacity of China's logistics industry. The transportation supply chain in our country is a long service chain with layers of subcontracting. There will be at least third-party logistics and dedicated logistics providers subcontracting between shippers and truck drivers who actually undertake transportation obligations. During this period, various entities such as "small freight forwarders", "scalpers", and "logistics parks" will also complete the matching of vehicle and cargo information.
In addition to a long supply chain, the main operators of highway logistics in China exhibit characteristics such as small scale, scattered distribution, large quantity, and weak operation. According to incomplete statistics, there are currently over 7.5 million highway logistics enterprises in China, with an average of less than 2 vehicles per household. Among them, the top 20 enterprises account for less than 2% of the market share, while the five major highway logistics companies in the United States occupy 60% of the market share. From the perspective of business operation, China's highway logistics is in a state of "scattered soldiers wandering", with a low level of industrial organization. More than 90% of the transportation capacity is controlled by individual operators, and the industry concentration is only about 1.2%, making it difficult to form economies of scale.
Overall, China is the world's largest road freight market, but also an extremely inefficient and fragmented market. This market characteristic makes financial institutions eager to try the logistics finance market, but at the same time, it is also full of difficulties. Logistics finance seems to be a "beautiful looking" market.
The development bottleneck of logistics finance
According to data from the Logistics Finance Committee of the China Federation of Logistics and Purchasing, the loan financing needs of logistics enterprises in China are conservatively estimated to be over 3 trillion yuan, but less than 10% of the needs are met by traditional financial institutions. Only logistics freight financing is advanced, with a financing demand of about 600 billion yuan. However, road transportation companies are small and scattered, and the proportion of loans from traditional financial institutions is less than 5%.
The above data indicates that the supply of logistics finance in China is seriously insufficient compared to the huge economic volume of the logistics industry. The reason for this supply shortage may be that traditional financial institutions such as banks do not like small and micro logistics enterprises, but the more important reason may be that banks lack the ability to serve this customer group.
The basic corporate credit logic of banks is to evaluate three types of credit:
One is collateral credit, where the borrowing entity can provide qualified and sufficient collateral, thereby granting credit based on collateral credit.
The second is subject credit. The borrowing entity provides sufficient and reliable financial and operational information to the bank, which can comprehensively and accurately reflect the asset liability situation, cash flow situation, and profit situation of the enterprise. Based on this, the bank can determine the credit limit and risk pricing based on the enterprise's subject credit.
The third is transaction credit. When the collateral credit and subject credit of financing enterprises are insufficient, banks can judge their transaction credit as long as they determine that their transaction background is real and continuous, and can provide loans by evaluating default costs (industry reputation, etc.) or locking in transaction funds as repayment sources.
However, small and micro logistics enterprises are unable to meet the credit conditions of banks in these three aspects.
At the level of collateral credit, the subordinate vehicles of small and micro logistics enterprises are generally owned by individual drivers and do not enjoy actual property rights, making it difficult to carry out collateral financing.
At the level of subject credit, small and micro logistics enterprises have a small scale, irregular finance, and weak subject credit.
At the level of transaction credit, the transaction information of small and micro logistics enterprises in China is extremely fragmented, with complex transaction processes and low degree of organization. There is no unified standard for transaction information, and even the authenticity of the most basic waybill is difficult to verify. Therefore, small and micro logistics enterprises lack the most basic transaction credit.
At this point, the difficulty and high cost of financing for this group are self-evident.
How can logistics finance break through?
It can be said that logistics finance is a hot potato, with infinite market space, but it is difficult to do well. The most crucial aspect is the need for a mechanism to enable banks and other financial institutions to have a full understanding of small and micro logistics transportation enterprises, to integrate, transparent, and unify the information flow of logistics business, and to eliminate information asymmetry between the financial industry and the logistics industry.
In my opinion, to eliminate information asymmetry, we can mainly start from the following three aspects:
One is to vigorously promote the rise of emerging data service companies. At present, the logistics industry is generally still in the stage of using handwritten notes and Excel spreadsheets to manage transportation information, with operational and financial data disconnected, low financial transparency, and difficult credit evaluation. The key link to solving this problem is Kaijing Technology, which is invested by Ant Financial in this strategic investment. The "Kaijing Logistics Cloud" SaaS platform developed by it focuses on data services for logistics groups such as whole vehicles, dedicated lines, less than truckload vehicles, fleets, and drivers, and digitizes the daily management of goods transportation, vehicle management, fund settlement management, financial service management, and more. In the future, if financial institutions want to serve the customer base of small and micro logistics enterprises well, deep cooperation with these logistics industry data platforms is essential.
The second is to focus on the core customer group and embed financial products into scenarios. Small and micro carriers/fleets are the group that actually bear the transportation capacity, with the strongest financial demand and the most insufficient financial supply. Traditional bank credit logic and operation models cannot serve this customer group, and it is necessary to innovate financial service models, use big data risk control and Internet of Things and other financial technology means to achieve online business, data-driven and automated risk control audits.
It should be pointed out that financial product services for small and micro logistics enterprises are not only providing inclusive loans, but also providing business support such as settlement and payment. Credit products must be embedded into the original supply chain process and cannot increase the additional operating costs of this customer group. Only by embedding credit into the accounts receivable (freight) and payable processes (such as fuel and toll fees) of the core customer group (see figure above) can we truly control "transaction credit", identify the authenticity of trade, and thus control the substantive risks of this type of business.
The third is ecological synergy, co building standards, and building logistics and financial risk control infrastructure are key.
The market for logistics finance is huge and cannot rely solely on a few fintech companies or top banks. What is needed is the overall empowerment of the financial industry. Currently, China's consumer finance industry has made significant progress in technology and inclusiveness, which cannot be separated from the support of industry infrastructure such as personal credit reporting by the central bank and sesame credit.
For small and micro enterprise finance, similar industry infrastructure is also indispensable. Logistics industry entities, logistics data service companies, and financial institutions need to reach consensus on standards such as data categories and measurement methods, and then form a logistics industry credit system for small and micro logistics enterprises based on data sharing, jointly controlling the four key risk control points of transportation capacity supply chain finance: authenticity of transportation behavior, continuity of operational data, self repayment, and standardization of internal management.
It is encouraging that this synergy is forming. On April 1, 2018, the first domestic commercial logistics bank alliance initiated by Zhengzhou Bank was established in Beijing, aiming to connect relevant entities in the field of commercial logistics finance, such as commercial logistics industry entities, financial institutions, e-commerce, and logistics technology companies, and form a joint force of finance+technology to empower the logistics industry.
In addition, the Logistics Finance Professional Committee of the China Federation of Logistics and Purchasing has released the "Financing Evaluation Index System and Its Application for Highway Freight Enterprises", which lists dozens of credit evaluation data dimension standards for small and micro logistics enterprises in seven aspects: macro environment, basic enterprise information, executive information, business management information, financial management information, integrity management information, and service evaluation, The process of unifying financial data in the logistics industry is expected to accelerate significantly.
epilogue
Undeniably, small and micro enterprise finance has become the forefront of innovation in China's financial industry. From the National Financing Guarantee Fund launched by the State Council to support the financing of small and micro enterprises, to various mutual fund giants launching exclusive financial products for small and micro enterprises, such as Ant Financial's "Code Merchant Growth Plan", Suning Bank's "Tax e-Loan", Meituan Financial's "Business Loan", and so on.
However, the path of innovation in small and micro finance will still not be as easy. As Chairman Tian Guoli of China Construction Bank once said, "Serving small and micro enterprises is not only a desire, but also a skill." Among them, the most important skills are the ability to understand the transaction logic of the industry, the ability to transform the industry with data, and the ability to use industry data for financial innovation. The cultivation of these skills and the maturity of the industry itself require time accumulation and the unremitting efforts of practitioners.
Rome was not built in a day, and the path of financial services for small businesses will not be smooth. From the practical path of logistics finance, developing small and micro enterprise finance well not only requires good intentions and strong service capabilities, but also requires industry cooperation to work together in the same boat. The good news is that all of this is happening.