CroPay is positioned to enter the B2B Buy Now, Pay Later (BNPL) landscape, targeting the unique needs of Italy's agricultural business sector. Our innovative approach addresses the inefficiencies of traditional payment methods, such as postdated checks and extended billing cycles, which are prevalent in this industry. By introducing a BNPL service that offers biweekly instalment payments or deferred payment terms of up to 90 days, we enable merchants to receive full payment upfront, thereby enhancing their liquidity, while buyers benefit from more manageable cash flow and simplified expense management.
The Italian agricultural market, with total revenues of €65.4 billion in 2022 and a compound annual growth rate of 18.8% from 2017 to 2022, presents a substantial opportunity. CroPay aims to capture a conservative 0.01% market share in its first year, which we project to increase in subsequent years. This approach is expected to yield revenues of approximately €6.54 million in the first year, growing to €13.08 million and €19.62 million in the second and third years, respectively.
Our solution leverages the Distributed Ledger Technology (DLT) to create a robust secondary market for bonds and Collateralised Loan Obligations (CLOs), appealing to a wide range of investors including hedge funds, family offices, and retail investors. This technology not only streamlines the payment process but also opens up new opportunities in the payment sector, fostering competitiveness and innovation.
CroPay's go-to-market strategy capitalises on the founders' personal networks within the agri-food companies in Northern Italy. This initial engagement is expected to catalyse organic growth through word-of-mouth and referrals. As we establish our presence, we plan to replicate this success in other sectors that are similarly resistant to innovation, ensuring a methodical and sustainable expansion.
In conclusion, CroPay is strategically positioned to deliver significant value to all stakeholders—merchants, company buyers, and investors. With the BNPL sector in Italy showing strong market dynamics and consumer adoption trends, CroPay is not just offering a payment solution; we are shaping a more agile, resilient, and prosperous business ecosystem for the future.
- Market Size: The Italian agri-food sector is valued at €65.953 billion, representing 3.8% of Italy’s total economy.
- Global Standing: It ranks third in the European Union in terms of production value.
- Compaison to GDP: The entire supply chain, including restaurants, distribution, transportation, logistics, and intermediation, contributes about 15% to Italy’s GDP.
The BNPL payment industry in Italy is experiencing a strong growth, with projections showing an annual growth rate of 22.4% in 2023 and a CAGR of 12.6% from 2023 to 2028. The BNPL Gross Merchandise Value in Italy is expected to increase from $4,820.1 million in 2022 to $10,697.8 million by 2028.
- Dominance of SMEs: SMEs constitute the majority of Italian companies, representing nearly 80% of the industrial and service sectors and generating about two-thirds of turnover and value added.
- Payment Delays: There has been a trend of fluctuating payment delays, which started rising again at the outbreak of the health emergency but returned close to pre-pandemic levels by the end of 2020.
- Online Payments: The adoption of online payments is expected to continue increasing, prompting businesses to upgrade their payment infrastructure.
[More](https://www.oecd-ilibrary.org/sites/82245334-en/index.html?itemId=/content/component/82245334-en#:~:text=Business,at the end of 2020)
Analysing the data, CroPay's Buy Now, Pay Later (BNPL) solution aligns seamlessly with the current trends and needs of the Italian agri-food market. The market's significant value of €65.953 billion and the dominant role of SMEs, which account for about two-thirds of the turnover, present a ripe opportunity for innovative financial solutions. With the growing preference for online and digital payment methods, including a notable 1.8% for BNPL, CroPay can capitalize on this shift. The fluctuating payment delays in the sector further underscore the need for more flexible payment options. CroPay's entry into this market is timely, as its BNPL solution can cater to the growing demand for digital and flexible payment methods while supporting the vital SME segment in enhancing their cash flow and operational efficiency. This convergence of market needs and CroPay's offerings positions it favorably for successful market penetration.
The Italian agri-food industry, amidst various challenges like climate change, ramping inflation, and pandemics, has progressively increased its adoption of digital tools and technologies. This trend aligns with the global movement towards Industry 4.0, emphasizing innovations like artificial intelligence, big data, IoT, blockchain, and robotics. However, the full implementation of these technologies across the sector remains a work in progress. More
In this context, CroPay's digital payment solutions could play a pivotal role. By offering a digital payment platform tailored to the specific needs of agritech businesses, CroPay can help accelerate their digital transformation. Its solution, compatible with high transaction volumes and offering low fees, is particularly relevant for SMEs that make up a significant portion of this sector. Moreover, CroPay's system addresses the need for delayed payments – a critical requirement in the agri-food industry. Additionally, the easy integration of tax reporting and payment accountancy in CroPay's platform can simplify financial processes for these businesses, enhancing efficiency and compliance. Thus, CroPay's digital payment rails could be a key facilitator in modernizing the agri-food sector in Italy, aligning with the industry's evolving digital landscape and operational needs.
Digital Transformation and ICT Status in Agriculture and Agrifood Companies in Trentino Alto Adige
Overview A case study focusing on a group of firms in the Trentino Alto Adige region reveals significant strides made in digital transformation since 2015. This includes the adoption of new management software, information and communication technology (ICT) systems, advanced robotics, IoT, and big data analytics. These initiatives have enabled vertical integration within the company, enhancing big data collection and analytics across various organisational levels, from orders to production planning and logistics.
Advancements in Production Industry 4.0 investments have led to automation, robotisation, and digitalisation in production lines, particularly in pouch-filling. This has improved quality control, hygiene, and food safety measures. The adoption of X-ray machines, QR code readers, bar code readers, and precision weighing machines further exemplifies the integration of advanced technological tools in production processes.
Challenges in Integration Despite these advancements, there's a noted discrepancy in the level of digitalisation between customers and suppliers. Customers exhibit a higher level of digitalisation compared to suppliers, who are less prepared for digital integration. This gap highlights a potential area for improvement in horizontal integration across the supply chain.
Economic and Environmental Outcomes The shift towards digitalisation and Industry 4.0 technologies has yielded positive economic and environmental outcomes. There's an increase in productivity and operational efficiency, along with reductions in waste, energy consumption, and CO2 emissions. These improvements contribute to the economic and environmental sustainability of the firm.
CroPay's Role In this context, CroPay's digital payment solutions could significantly aid these agritech businesses. By providing digital payment rails that align with their operational needs, such as accommodating high transaction volumes with low fees and enabling delayed payments, CroPay can bridge the existing digital gap, especially between suppliers and customers. Furthermore, its platform can assist in streamlining tax reporting and accountancy, thereby enhancing overall efficiency and compliance in the evolving digital landscape of the agrifood sector in Trentino Alto Adige. More
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Efficiency in Payment Collection: CroPay's solution alleviates the need for merchants to chase buyers for missed payments, as it guarantees immediate payment upon sale, a crucial benefit given that SMEs, a significant part of the Italian economy, often face challenges with delayed payments.
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Reduced Risk of Fraud: The platform's advanced verification and secure payment processing mechanisms significantly lower the risk of fraud and non-payment, a vital feature in today's increasingly digital transaction environment.
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Enhanced Cash Flow Management: Buyers gain the flexibility to make purchases without needing immediate capital, allowing for better financial planning and cash flow management, aligning with the increasing trend towards digital payments in Italy. In 2022, around 20.4% of Italian consumers used a mobile wallet for in-store purchases, reflecting a growing preference for digital payment methods.
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Streamlined Payment and Tax Management: The user-friendly interface of CroPay simplifies the management of payments and taxes, integrating these essential financial tasks into a streamlined platform.
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Attractive Returns: Investments in CroPay promise above-market returns, a claim supported by the projected global BNPL market growth. The market is expected to grow at a compound annual growth rate (CAGR) of 25.5% from 2023, reaching a value of $309.2 billion, which indicates a strong potential for profitability in this sector.
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Contribution to Italy's Economic Growth: Investors also contribute to the growth of Italy's entrepreneurial sector, particularly the agrifood industry. By investing in CroPay, they support the modernisation and digital transformation of a vital part of the Italian economy.
- Invoicing Assistance: All parties can benefit from CroPay invoicing sorting and auto-generation to make tax reporting easier with automatic integration inside the most used tools for business invoicing.
Source: https://www.oecd-ilibrary.org/sites/82245334-en/index.html?itemId=/content/component/82245334-en#:~:text=Business,at the end of 2020
https://www.globenewswire.com/news-release/2022/12/23/2579023/28124/en/Global-Buy-Now-Pay-Later-BNPL-Market-Research-Report-2022-2027-Market-is-Forecast-to-Grow-by-Almost-25-Billion.html#:~:text=The Global Buy Now Pay,70 million by
The B2B Buy Now, Pay Later (BNPL) market in Europe is rapidly growing and becoming increasingly competitive. Key players in this space include:
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Mondu: A Berlin-based B2B BNPL firm focused on offering flexible payment solutions to wholesalers and businesses. Mondu allows businesses to integrate BNPL options into their online checkout flows and handles the assessment of buyers' creditworthiness and the associated non-payment risks.
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Hokodo: In partnership with French FinTech Lemonway, Hokodo targets marketplace platforms, offering BNPL solutions that integrate risk assessment technology and expertise in platform payments and compliance. This collaboration aims to introduce flexible payments to thousands of buyers and sellers in Europe’s B2B marketplaces.
CroPay, in contrast to these generalist BNPL providers, offers a solution uniquely tailored to the agrifood sector in Italy, which has specific characteristics and needs:
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Sector-Specific Focus: CroPay's deep understanding of the Italian agrifood sector enables it to offer solutions that are finely tuned to the unique challenges and payment practices of this industry. This focus allows for a more effective and efficient service that general BNPL providers might not be able to match.
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Adaptability to SMEs' Needs: The majority of businesses in the Italian agrifood sector are SMEs, which often face issues like delayed payments and require specific financial support. CroPay's model is particularly suited to addressing these challenges, offering immediate payment to merchants and flexible payment terms to buyers, a feature that is crucial in a sector where cash flow can be unpredictable.
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Customised Technology Solutions: Considering the technological backwardness in parts of the Italian agrifood sector, CroPay's technology is designed to be easily integrable and user-friendly, catering to businesses that might not be as digitally advanced. This accessibility is vital for ensuring widespread adoption and effectiveness.
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Local Market Knowledge: CroPay's focus on the Italian market gives it an edge in understanding local business practices, cultural nuances, and regulatory requirements, which can be a significant advantage over global or Europe-wide BNPL providers that may not have the same level of local insight.
CroPay Finance's technical solution is intricately designed to complement its business model, focusing on revolutionising the B2B Buy Now, Pay Later landscape for the agricultural sector in Italy. Here's a breakdown of its technical aspects paired with the business solution:
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Distributed Ledger Technology (DLT): CroPay uses DLT to create a robust secondary market for bonds and Collateralised Loan Obligations (CLOs). This technology is crucial for providing investment opportunities and attracting new investments into the agricultural sector. DLT is known for its security, transparency, and efficiency, which are essential in managing financial instruments and investment portfolios.
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Integration of Stablecoins: CroPay has integrated stablecoins for cross-border transactions. This integration significantly reduces costs associated with currency conversion and international remittance by about 10%. Stablecoins offer the stability of fiat currencies while leveraging the benefits of digital currency, making them ideal for international trade.
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Throughtful Underwriting Process: The platform incorporates open banking data and historical credit reports for efficient risk assessment. Open banking allows secure access to financial information, providing a comprehensive view of a customer's financial behavior, which is critical for accurate credit scoring.
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Streamlined Payment Process: For both merchants and customers, CroPay offers a simplified payment process. Merchants receive full payment upfront, while companies can choose biweekly installment payments or deferred payment terms of up to 90 days. This approach directly addresses inefficiencies of traditional payment methods like postdated checks and extended billing cycles.
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Enhanced Liquidity for Merchants: By receiving payments upfront, merchants have instantly available liquidity, crucial for the smooth operation of businesses in the agricultural sector.
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Effective Cash Flow Management for Buyers: Buyers benefit from flexible payment options, aiding in better cash flow and expense management.
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Market Potential: With the Italian agricultural products market generating substantial revenues and a high growth rate, the potential for BNPL services, especially tailored for B2B transactions, is significant.
CroPay's portfolio management strategy intricately combines liquidity management, risk assessment, and capital deployment to optimise returns while ensuring financial stability. At its core is a sophisticated internal risk engine that leverages advanced analytics and open banking data to assess risks associated with lending and investments. This approach enables informed decision-making about creditworthiness and investment opportunities.
A significant part of the portfolio is invested in bonds and CLOs, which provide a steady income stream and diversify the portfolio, thus mitigating risks. The balance between maintaining liquidity and investing in financial instruments like European Central Bank 30-day bonds is crucial. This ensures that there is sufficient liquidity to meet borrowing demands while earning returns on invested capital.
Furthermore, CroPay leverages the blockchain to enhance the transparency, security, and efficiency of its portfolio management, particularly in managing bonds and CLOs in the secondary market. This technology aids in streamlining the investment process.
To attract investments, CroPay offers six-month redeemable bonds to entities such as hedge funds, family offices, and private equity firms. These bonds yield returns composed of bond interest and a performance-based premium. The securitisation process, supported by tokenised bonds, empowers CroPay to recycle capital effectively, enabling repeated lending with the same pool of funds.
Overall, CroPay's portfolio management is tailored to support its business objectives, balancing the need for liquidity with the potential for high returns, all while managing risk in a dynamic financial environment.
CroPay's go-to-market strategy is carefully crafted to ensure a strong market entry and sustained growth in the Italian agricultural sector. The strategy hinges on leveraging personal networks and relationships, a methodical expansion approach, and a focus on sector-specific challenges:
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Leveraging Founders' Networks: CroPay plans to utilise the personal networks and connections of its founders with key players in agri-food companies across Northern Italy. This strategic engagement with businesses where the founders have direct relationships not only validates the product but also acts as a catalyst for organic growth through word-of-mouth and referrals.
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Focusing on Agri-food Sector Initially: Initially, CroPay is targeting the agri-food sector in Northern Italy, a market with significant potential and specific needs that align well with CroPay's offerings. By entering a familiar market where the founders have existing relationships, CroPay can establish a strong foothold and build a reputation for its BNPL solutions.
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Scaling Beyond Initial Niche: After establishing its presence in the agri-food sector, CroPay aims to replicate its success by expanding the BNPL model to other sectors that are similarly resistant to innovation. This expansion will be methodical, ensuring that CroPay can adapt its offerings to meet the unique challenges and payment practices of each new industry.
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Strategic Positioning: CroPay positions itself as not just a payment solution provider but as a catalyst for a more agile, resilient, and prosperous business ecosystem. This positioning is backed by a deep understanding of consumer behaviour insights and market dynamics.
To calculate the actual CroPay turnover, it is relevant to consider both the interest paid on the loans taken from investors and the effective interest earned from lending out and then securitising those loans.
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Interest on Loan Taken:
- You borrow €1 million at a 7% annual interest rate.
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Interest Earned from Lending:
- Lend out at a 5% annualised rate.
- Every 30 days, we securitise the loan, earning an additional 3.5% annualised via the linked leverage effect.
Since we securitise the loan every 30 days and lend it out again, we effectively compound earnings monthly.
The formula to convert an annual interest rate to a monthly interest rate is:
The formula for APY, accounting for monthly compounding, is:
Here are the calculations for the scenario:
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Monthly interest rate on loan: The monthly interest rate for a 7% annual loan is approximately 0.5654%.
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Total monthly rate earned from lending and securitisation: Combining the monthly rates from 5% lending and 3.5% securitisation fees, the total monthly rate earned is approximately 0.6945%.
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APY earned: The APY earned from lending and securitisation activities, considering monthly compounding, is approximately 8.66%.
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Net APY: After accounting for the 7% interest paid on the loans, the net APY of CroPay operations is approximately 1.66%.
These calculations indicate that, after paying the interest on borrowed funds, the net earnings from the lending and securitisation activities yield an annual return of about 1.66%.
Based on the updated APY of 3.66%, here are the recalculated net profits for CroPay over the first three years:
- Year 1 Net Profit: €7,300 (from a transacted volume of €200,000).
- Year 2 Net Profit: €73,200 (from a transacted volume of €2,000,000).
- Year 3 Net Profit: €219,592 (from a transacted volume of €6,000,000).
- Starting funds: €400,000
- Total expenses: €150,000.
- Net revenue: €7,300.
- Remaining funds: €257,300