In reality, FinTech offers a number of solutions to some of the most pressing problems facing farmers.
Increasing farmers’ access to funding and streamlined payment methods
For many farmers, the decision to grow crops during the season, invest in more efficient farming methods, or purchase new equipment relies on their access to funding. Despite the importance of the agricultural sector, financial institutions are historically reluctant to provide services to this group. The rural location of farmers and their low population density incurs a high cost of service, so banks don’t view them as a profitable area. Moreover, banks consider farming a high-risk investment.
There’s a similar lack of FinTech innovations in the agricultural payments space.
“Most of cash grain trade is between a farmer and established businesses that have support staff who execute payments via either paper cheques or direct deposit,” explains Brennan Turner, CEO at FarmLead, a company focused on digitally connecting cash grain trading networks and integrating trade data into other farmer & grain buyer digital tools. “Further, the payment is usually delayed by one to three business weeks, which can sometimes create cash flow challenges, depending on the time of year.”
The lower overhead of FinTech solutions provides an opportunity for entrepreneurs to create user-friendly banking, payments, and credit products for farmers. In areas of the world where banking infrastructure is underdeveloped, FinTech solutions also provide mechanisms for proper identification to ensure borrowers repay their loans. These solutions can also use real-time data from AgTech sensors and AI-enabled technology to measure the costs and risks of farmers based on their geography.
Addressing the disconnect between farmers, retailers, and manufacturers
Today, the trillion-dollar global agricultural industry relies heavily on spreadsheets and manual processes and very little on real-time information. This has an enormous impact on everything from seed pricing in response to commodity market fluctuations to creating marketing campaigns and incentives for crop inputs.
“What I’ve seen working in big companies in agriculture across the world is that it’s a very siloed industry between manufacturers, retailers, farmers, and grain companies,” explains Egor Kirin, Founder & CEO at Agro.Club, an agtech company focused on digitizing the crop input purchase experience. “They all live in a completely different world. I saw a need to build one ecosystem that can connect the value chain, because there are so many inefficiencies that destroy value and create a lot of frustration because people don’t communicate with each other and business transactions flow in an extremely disruptive manner.”
Delivering a more user-friendly way for farmers to purchase crop inputs
“Writing cheques is still very common in agriculture to pay crop input bills as these transactions are usually in the tens of thousands to millions of dollars range,” says Turner.
The friction in the crop purchasing experience isn’t strictly limited to payments. In the agricultural industry, it’s difficult to know who owns the price. This is due to the abundance of “programs”, which are complex configurations of deals and promotions for farmers.
“Agriculture is complicated, and pricing is a challenge,” explains Erin Romeo, Campaign Strategist with Agro.Club. “In agriculture, the degree to which we’re incentivizing farmer behavior is extremely high, and farmers and retailers are drowning in programs. If I’m a farmer trying to purchase seed, I’m looking at the volume tier my seed purchase is in. Am I buying the right amount of bags to get a certain discount? What's the time of year I'm buying that? Am I getting an early action incentive on top of that?”
According to Romeo, that’s a simple scenario. Today, programs layer multiple products. A single program may offer discounts for farmers if they buy a specific number of bags of seed with a specific type and amount of herbicide and a specific type of seed treatment.
“This creates ambiguity and complexity,” says Romeo. “And it’s multiplied as each company has their own programs.”
Meanwhile, retailers receive pages upon pages of product guides and marketing letters from manufacturers in an effort to explain. This creates a sales environment where sales representatives meet farmers at a trade show or at field tours and calculate different combinations of crop inputs on the spot. It’s a time-intensive process full of friction that creates unnecessary complexity for both retailers and farmers.
Agro.Club is simplifying this complexity by digitizing the crop input purchasing experience. Instead of paging through seed guides, farmers can purchase crop inputs with the same digital-first, user-friendly experience they have when purchasing anything else online.
Providing real-time data for agricultural retailers
When crop input manufacturers design programs and marketing campaigns, their goal is to incentivize certain behaviours and drive sales. Unfortunately, most don’t know if their initiatives work until months later.
Today, B2C retailers can launch a campaign for a product, monitor it, identify what isn’t working, and make adjustments until they gain traction. Crop input manufacturers and retailers don’t enjoy the same luxury. In response, Agro.Club has created a digital ecosystem that provides both an e-commerce hub and real-time information for everyone along the crop input value chain: manufacturers, retailers, and farmers.
“As a manufacturer or retailer, the fact that you get the data only 12 to 18 months later means it’s too late to make any changes for that particular campaign or even to your follow-up campaigns because you’ve already planned for them and they’re already in the field,” explains Kirin. “By connecting everyone in one digital ecosystem, now the farmer, the retailer, and the manufacturer are all in one data flow and transaction flow. Anytime a farmer is ordering something, that information hits the dashboard of the retailers and manufacturers in real time.”