APAC Middle-Market Leaders Embrace External Financing for Growth

We are in the midst of a working capital revolution — one that is increasingly driven by innovation and made more necessary by the macroeconomic backdrop, particularly for those middle-market firms generating annual revenues between $50 million and $1 billion.

As more firms seek out and put external capital to work, they are finding that today’s working capital solutions are providing them with the cash flow requirements needed to meet the day-to-day requirements of their businesses, as well as with the flexibility necessary to scale that business and thrive long term.

“The tightening of monetary policy and inflationary pressures have suddenly made a lot of these corporates realize they need working capital for two reasons,” Chavi Jafa, head of commercial and money movement solutions, Asia Pacific, at Visa, told PYMNTS. “One, for short-term working capital to make sure that they don’t have any operational disturbances. And two, for strategic long-term investments into newer technologies and digital solutions.”

“In a lot of emerging economies, [we are seeing] a leapfrogging of technology and digital-first solutions, and it’s this corporate segment that tends to drive a lot of the growth in digital economization — they need that working capital to invest,” Jafa said.

That’s why, when compared to traditional working capital solutions which include overdraft facilities and working capital loans, today’s innovative and alternative offerings, such as virtual cards, have emerged as a critical imperative for corporates seeking sustainable growth.

Unlocking Working Capital Innovation in APAC Region

The rising tide of digitization in Asia-Pacific (APAC) economies presents an opportunity for working capital innovation.

With a growing preference for mobile-first experiences, digital solutions like virtual cards offer a seamless and user-friendly approach to managing working capital. As Jafa explained, by using the ubiquity of mobile devices and digital-first experiences, businesses can streamline their financial operations and gain greater control over their cash flows.

“When we think about a virtual card, it’s basically a credit line,” Jafa said. “And why is it becoming more interesting to a lot of these corporates? Well, for one, it’s a digital solution that comes with better data, which makes it very powerful. The second reason is around flexibility — it can be drawn upon, as needed, by a business. And thirdly, a lot of controls can be set on virtual cards, allowing them to be used for whatever purpose is needed.”

“The mindset has shifted around working capital solutions because of the value proposition that something like virtual cards bring,” Jafa added, underscoring the operational efficiency that comes with automating an entire working capital workflow end to end via a virtual card.

Recognizing the diverse needs of different sectors, industry-specific working capital solutions are gaining traction. Tailoring solutions to the unique requirements of sectors like eCommerce, healthcare and construction allows businesses to address specific pain points and optimize their working capital management strategies effectively.

“Asia is a pretty disparate region,” Jafa said. “We have very digitally forward economies like Australia and Singapore, but we also have emerging economies like Indonesia, and then you have an economy like India, which is pretty large and quite digitally ahead.”

Businesses in each come with their own sets of needs and trends as they relate to embracing and deploying working capital solutions, she added.

Education, Awareness Needed to Scale Innovations

One of the primary challenges hindering the widespread adoption of alternative working capital solutions is the lack of awareness among businesses. Traditionally, overdrafts and working capital lines have been the go-to options, with many unaware of alternative solutions such as virtual cards.

Bridging this awareness gap requires concerted efforts from industry stakeholders to educate businesses about the diverse array of working capital solutions available to them, Jafa said.

Another transformative trend reshaping the working capital landscape is the concept of embedded finance, she noted. By integrating payment solutions directly into existing business platforms, such as enterprise resource planning (ERP) systems, businesses can enjoy a frictionless payment experience without the need to navigate external banking interfaces. This embedded approach not only enhances efficiency but also democratizes access to working capital across various industries, from eCommerce to healthcare to construction.

“Within the context of the consumerization of B2B payments, everyone wants a seamless payment experience,” Jafa said. “They don’t want to leave the environment they are in.”

By embracing digital-first solutions, using embedded finance capabilities and fostering collaboration across sectors, businesses can unlock new efficiencies and propel their growth in an increasingly competitive landscape. As awareness grows and partnerships flourish, the future of working capital management in APAC looks promising, Jafa said.