According to a report published on the front page of the FT this morning, Société Générale and Goldman Sachs are among several prominent banks that are formulating a plan to back Aztec Money. As Edwin Hagan-Emmin explained at November’s AltFi Global Summit in New York, Aztec is a trade finance marketplace for businesses in emerging markets. The platform – which claims to have sold hundreds of millions of corporate invoices despite only having launched in 2013 – is plugging a gap that has been left wide open after a large-scale retreat from the banks.
Aztec is all about taking ownership of the underserved “last mile”, as Hagan-Emmin puts it, of the corporate supply chain. The platform is capable of delivering yields in the 10% to 15% range. Whilst dubbed as a peer-to-peer platform by some, Aztec in truth is much more deserving of the “marketplace lender” moniker – as it is entirely funded by institutional investment.
Toby Lanyon, Chief Operating Officer of Trade River Finance – which is also operating within the cross-border trade finance space, weighed in:
“This is a logical and not entirely unexpected development. The direct involvement of large institutions in alternative finance solutions beyond the current somewhat arms-length funding provided to some platforms by banks was bound to happen and is broadly to be welcomed on two fronts.”
“Firstly, the implied validation of these innovative solutions by banks recognises that, far from being niche players, these alternatives are likely to become increasingly mainstream. Secondly, the scalability of such innovations in large markets commands the attention of those who have, until recently, had the lion’s share in terms of scale using “traditional” techniques.”
This is the latest in a series of major bank interactions with the alternative finance space over the past few months. Santander and Royal Bank of Scotland are now engaged in referral relationships with select peer-to-business lenders. Groupama Banque in France has committed to investing €100m via the Unilend platform over the next 4 years. We’re confident that a number of similarly evolutionary deals are coming.
Goldman, SocGen and Aztec reportedly refused to comment on the situation, but one person close to Goldman suggested that any kind of formal arrangement was still some way away. The banks are mulling over the possibility of purchasing invoices originated by the Aztec platform and then repackaging them. The marked influx into the sector of high yield seeking institutional investors has ramped up demand for peer-to-peer/marketplace lending-fueled securitisations. The opportunity could in theory be worth trillions. Data from the Securities Industry and Financial Market Association indicates that securitisation volumes in Europe have taken a dive from $1.2 trillion in 2008 to just $286 billion in 2014. In other words, a sizable gap has opened up – and Goldman and SocGen are searching around for a new underlying asset class with which to fill it. Could Aztec Money invoices fit the bill?