[Asia Economy Reporter Song Hwajeong] Shinhan Bank has gained an advantage in the small and medium-sized enterprise (SME) financial market competition as its equity investment made last year has borne fruit.
According to Shinhan Bank on the 25th, the bank is set to actively target the SME market by establishing a joint venture (JV) with Duzon Bizon. Shinhan Bank and Duzon Bizon signed a joint venture establishment agreement on the 22nd, and after setting up a preparatory corporation and undergoing financial regulatory approval procedures, they plan to jointly own equity and invest in and operate supplier finance intermediation and corporate data businesses.
The joint venture will promote financial intermediation businesses such as accounts receivable factoring, which allows rapid monetization of accounts receivable based on real-time accounting and enterprise resource planning (ERP) data credit evaluation models for SMEs, as well as various data businesses. Compared to large corporations, SMEs have limitations in receiving financial support from general commercial banks due to a lack of disclosed information and reliability. Through the joint venture, the two companies plan to resolve SMEs' funding difficulties and secure a firm leading position in the SME financial market.
Accounts receivable factoring is a financial service that quickly converts a company's accounts receivable into cash, facilitating smooth fund management for SMEs. Previously, Shinhan Bank and Duzon Bizon signed a strategic business agreement with the Korea Chamber of Commerce and Industry to provide accounts receivable factoring services and various financial products to 190,000 member companies of the Chamber.
The joint venture plans to build a digital platform that digitizes all processes of factoring application, screening, and execution through real-time accounting and ERP data analysis generated at each stage of SMEs' management activities, such as production processes and sales flows. Ultimately, it aims to complete SME-specialized supply chain finance by predicting funding demands at each stage of management activities in advance and proactively providing financial support. Once supply chain finance is activated, SMEs will be able to use various financial products with different maturities according to their management stages, enabling timely diverse financing and reducing financial costs. Additionally, the joint venture will combine Duzon Bizon's acquired 'corporate information inquiry business' and data analysis of SME management program users to supply credit information and other high value-added business information to financial institutions and related businesses as part of its data business.
Considering the financial regulatory approval procedures, the joint venture is expected to be established within this year at the earliest, with full-scale business operations commencing next year. This marks the fruition of Shinhan Bank's investment efforts since last year. In June last year, Shinhan Bank signed a strategic business agreement with Duzon Bizon and jointly proceeded with the financial platform construction project. In September, it invested 72.3 billion KRW to acquire a 1.97% stake in Duzon Bizon. Duzon Bizon is a dominant player in the ERP market that comprehensively manages corporate operations. Shinhan Bank decided on the equity investment to provide innovative financial services based on Duzon Bizon's real-time corporate accounting and transaction data.
Since the equity investment, Shinhan Bank has collaborated with Duzon Bizon in various fields. Following the launch of their first collaborative product, Duzon x Shinhan SolBiz Corporate Account, in November last year, they introduced a financial forecasting consulting service last month. The Duzon x Shinhan SolBiz Corporate Account allows corporate clients using Duzon Bizon's ERP to apply non-face-to-face via 'Shinhan SolBiz' and use the account immediately without limit on the credit line. The financial forecasting consulting service provides a three-step solution that analyzes a company's past (financial statements for the past three years) and present (real-time transaction status of purchases and sales), performs current situation analysis and diagnosis, and offers estimated financial forecasts and financial capacity for the next three years. This service, jointly developed by Shinhan Bank and Duzon Bizon, is provided online through Duzon Bizon's ERP system. If corporate clients who receive the solution want in-depth consultation, they are connected to 527 corporate finance specialists (RMs) nationwide at Shinhan Bank, offering a hybrid (on-off line) corporate finance service with detailed counseling.
A Shinhan Bank official said, "The collaboration with Duzon Bizon is significant as it is the first attempt in the fintech and financial company's corporate finance sector," adding, "We will continue service partnerships for SMEs together with Duzon Bizon."
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