SMEO -Digital Factoring for SMEs in Poland

Michal Pawlik during the CEE SME Banking Club Conference 2019 (Warsaw, October 22)

SMEO is a factoring company in Poland, providing purely online factoring services to SME customers. SMEO has worked in the Polish market since 2018, winning almost 2,000 customers and processing invoices worth over PLN 180 million. Olena Gryniuk talked to Michal Pawlik, CEO and Co-Founder at SMEO, about the company’s 2019 results and future plans.

Olena Gryniuk: Was 2019 successful for SMEO? What were your main achievements?

Michal Pawlik: First, our turnover this year was tremendous; we processed invoices valued at over PLN 180 million. Also, we were able to establish a successful partnership with Santander Leasing. This deal is already generating significant revenue for both Santander and SMEO.

OG: In one of your presentations, you showed the statistic that only 10% of entrepreneurs in Poland know what factoring is. And 4% of SMEs use factoring in Poland. For other markets in the CEE region, this percentage is even lower. How do you deal with that? How do you educate small businesses?

MP: We believe that educating our market is the key to our success. That’s why we spent more than EUR 1.2 million on marketing in 2019. We know that the knowledge gap won’t be closed overnight, but we also know that once entrepreneurs understand the value of our product, they immediately want access to it. This explains the incredible growth we’ve seen. All it takes to educate the public is time.

OG: Who is your customer exactly? Can you describe the profile of your average customer?

MP: At SMEO, we view any viable firm as a potential customer. For some financial institutions, entire industries can count themselves as persona non grata, for example TSL (Transport Shipping and Logistics). Often, banks and institutional lenders treat them unfairly. We don’t.

Now, we are focused on small and medium sized firms. This is a market segment that has been historically underserved by financial institutions. But these businesses are the lifeblood of our economy. As a macroeconomist myself, these dynamics are important to me. They are our foundation! At SMEO, we aim to treat them with the respect they deserve.

OG: What is the maximum amount you finance per customer?

MP: Customers have a limit of EUR 60,000, or PLN 250,000. As of the fourth quarter of 2019, SMEO provides financing in both currencies: PLN and EUR.

OG: You acquire 70% of your customers online, and you have a fully digital automated decision-making process and disbursement. How much money have you invested in IT systems?

MP: Technological innovation is key to SMEO’s position as an industry leader in Central and Eastern Europe. We’ve invested EUR 1.1 million in R&D and technology. But that figure only tells part of the story. Anyone can pump investment money into a complex system. At SMEO, we understood the traditional factoring product well enough to target areas for optimization and efficiency. So, we use the technology in ways that actually drive revenue and improve the customer experience.

OG: The other 30% comes from partners. Who do you partner with? And do you do this as a co-branding project or white label?

MP: We believe that the way forward for many FinTechs is to seek out partnerships and the accelerated access to clients they represent. SMEO has developed both co-branding and white-label partnerships. We have more than 10 active partnership agreements. Most of these are with financial institutions and IT companies.

OG: How many people work in SMEO? How many of them are IT personnel?

MP: We have 35 employees. More than 30 percent of our workforce is in IT.

OG: Now you work on the Polish market. Have you been thinking about expanding SMEO to other markets in the CEE region?

MP: Our plans for expansion depend on partnership agreements that I can’t talk about in detail right now. Nevertheless, our home market is Poland; we are focused on improving our offering here and reaching our 2 million businesses. This is a very entrepreneurial country, which means there’s a lot of room to grow at home.

Watch SME Banking Club’s Webinar featuring Michal