Physical 🀝 digital. Let's get phygital
By Niall Haughey profile image Niall Haughey
6 min read

Physical 🀝 digital. Let's get phygital

This post discusses phygital fintech

Welcome back to the Agri Fintech Newsletter and a warm welcome to the 29 new subscribers since my last issue.

February is almost over and everything seems to be happening in March.

πŸ‘€ The Agri Fintech Investment Report for 2022 will be released in early March.

✈️ I will be attending the World Agritech Innovation event in San Francisco in mid March. Reach out if you will be there as I would love to connect. 🀝

In this Issue

🧐 Thoughts - [Let's get Phygital. Physical meets digital]. This write up is more of a thought piece than my usual analysis.

πŸ—ž Relevant News - I have wondered if I could pull off a news only issue similar to Upstream Ag or This Week in Fintech and this week it almost happened. There are so many fantastic talking points below. πŸ‘‡

Farmers Business Network and Oxbury pass the $1bn disbursed milestones, Growers Edge extend their Series B and change leadership, GrainChain raise a huge $29m for global expansion. Updates from CropSafe, ProducePay and Carbonplace.

Let's get Phygital

Until we all start growing our food in the metaverse most Agritech is phygital i.e. a blend of digital meets physical, right?

Phygital Fintech is also a theme that I have come across and I think it plays out nicely with AgriFintech. I’ve seen phygital materialise in two ways.

1️⃣ Maybe the most basic is physical retail adding digital technologies in house. For example, have you been to McDonalds recently? I had an 'emergency' McDonalds recently and was quite impressed by a touchscreen ordering system which, in every way felt like using a highend tablet. It was simplistic and straightforward.

I remember thinking, β€˜Hmm, this is clever and a huge upgrade on the last experience I had’. (But hey, the burger was smaller πŸ€·β€β™‚οΈ )

2️⃣ The second way is digital brands opening physical locations and this first came across my radar when Amazon started offering physical delivery to lockers. This has since been expanded to Amazon Go stores which allow registered customers to browse, select stock and just walk out. An automatic digital check out and payment happens for you.

Amazon have taken a step even further, especially with phygital fintech. Their Amazon Cash service allows customers to deposit cash into their Amazon account through physical locations.

This integration of physical and digital experiences makes it easier for customers without access to traditional banking services to manage their finances.

Could it work for Ag Retail?

The relevance of phygital fintech crossed my mind after writing about the emergence of Fintech in Ag Retail.

I received a great comment post script from Alexander Reichert, CEO of AgVend, who knows a think or two about the sector.

If ag retail can establish a digital connection with their customers, this opens the distribution door for a host of new products, financial services being the one featured here!
This assumes that the digital connection is designed to be additive to the grower-agronomist relationship, ie. not a replacement.

πŸ’‘ The "grower-agronomist relationship". Of course.

In the issue above, I discussed agricultural retail and highlighted Nutrien as an example of a major retailer increasing their online sales channels. These digital sales applied to both customer checkout and employees using their digital platform.

That’s a great example of phygital, especially when you consider a relationship ebbing back and forth between retailer, agronomist/ advisor and the actual producer.

In fact, McKinsey highlight this in their recent Voice of the US farmer in 2022 report.

β€œPreference for digital-only interactions has not increased over time, while omnichannel is becoming the preferred approach to support farmers in their purchasing journeys. More than 50 percent of farmers view customization of recommendations and adequate customer service as the largest challenges in purchasing online”

Amazon Go for Ag Retail, or β€˜Ag Retail Go’ anyone?

It's probably not as wild as it sounds. I also suspect I'll have one or two emails post script to say something like "We are working on something like this". πŸ‘€

How can this relate to Fintech?

I've discussed the McDonalds and Amazon examples and maybe you have experienced these for payments or even pay-in for Amazon Cash.

But what if we are talking about higher value payments if the financial offering goes hand in hand with the product, such as with Ag Retail or Equipment?

When you introduce a bespoke credit scenario, such as an input finance package, into a phygital check out it starts to look interesting.

Not only does the product suitability potentially involve a digital screening (GIS mapping for example) but the credit assessment needs to happen quickly and, therefore, probably be fully digital also.

➑️ Already we have seen alternative lenders in the US working hard to reduce that timing to 24 hours and at least 2 companies have mentioned this target to me privately for large scale credit purchases.

I spoke to one Fintech in the UK this week that got the process down to 51 minutes for an equipment purchase. 🏎️

Getting arms around the physical assets and nature of agriculture for financial purposes will continue to be interesting as is the importance of digitising finance flows. But so far, I've only noted one company in Agritech reference it - Hesa in India who state:

Rural commerce ecosystem is still driven by trust, relationships and physical interactions. But without a digital interface, the potential is largely untapped.

For now, the concept of Phygital Fintech, especially within Agriculture is verrryy niche, but I think it is something worth keeping an eye on for trends and ideas.

I think the statement above from Hesa is true if you are in India or Indiana. What do you think?

πŸ“° News

As I mentioned above, there have been numerous talking points in the past 2 weeks and 3 in particular deal with a similar theme.

β¦Ώ Farmers Business Network (FBN) and Oxbury hit $1bn milestones

FBN announce cumulative lending of $1bn as they launch a bridging finance solution to speed up land purchases for their members.

In the UK, Oxbury announce break even, having also distributed over Β£850bn (just over $1bn) in loans since commencing operations just two years ago.

This is interesting - what do you think?

FBN Finance, the Financing business of FBN, has grown in stature in recent years with several products launched into the market in the last 18 months. My opinion is that FBN Finance will be front and centre should they go public at any point. BUT... they have several different levers to pull in creating the narrative for their business, one of which is their distribution capacity for financial products.

This product appears to be financed via Farmer Mac and the time frames suggested - 3 weeks - suggest time is a key priority for farmers and for them as a financing company.

Oxbury are different and pride themselves on doing one thing - and one thing only - i.e agricultural finance, so hitting that number in a smaller UK market, in a shorter time frame is testament to their execution and focus. 🎯

The contrast doesn't end there as Oxbury also offer a broader range of products, including savings products which they use to fund their loan growth.

The $1bn metric may be just a milestone for both businesses but it is a great headline and a new target for others in the market.

What do you think? Is it just a vanity metric or does the scale count? What do you think about the funding structure?

β¦Ώ Growers Edge announce a $15m Series B extension and appoint Hollie Bunn as interim CEO.

Growers Edge have evolved their proposition recently to focus more on lending partnerships with major cooperatives, such as this one with Valley Ag announced in September.

Lending is about risk management at scale and it makes sense for a specialist, as Hollie is, to take the reigns at this point. It is also encouraging to see existing investors participate in this round as the company finds its' feet in a new funding environment.

But what happens next? It will be interesting to see if there are major strategic changes on the horizon or funding partnerships which will take the business to the next level.

Does it target increased scale to reach a symbolic $1bn mark in the coming years or stay focused on specific offerings and profitability?

Oxbury above suggest both is possible.

β¦Ώ CropSafe are a fledgling AgriFintech based in Northern Ireland but with a presence in the US also.

I was delighted to read that founder and fellow Ulsterman John McElhone was awarded a place on the Thiel Foundation Fellowship. Congrats πŸ‘

β¦Ώ GrainChain raise $29bn for global expansion. I caught this news in Agfunder this week and have to say I was a little surprised as a lot of blockchain based grain trading companies have come and gone in recent years.

GrainChain received early funding of $2.5m in December 2018 for blockchain based grain trading technology and I clearly remember sitting in a hot office in southern Africa thinking this was wild when I read about it.

The company operate primarily in Latin America and have seen continued success in the region. This market is a bit of a blind spot in my knowledge, so I clearly still have a lot to learn.

β¦Ώ ProducePay add a virtual storefront for agricultural produce. This is very Pinduoduo like so I can't wait to see how this develops.

β¦Ώ Carbonplace - another Carbon marketplace - has been backed by 9 international banks. The backers are serious global institutions but I'm frankly baffled by the surge in carbon marketplace activity in the past 12 months.

I get the growth assumptions for Carbon as a product, but as it is a data product, it will get commoditised quite quickly.

One notable investor is National Australia Bank, who are already active in the Agri Fintech space with Geora, the blockchain enabled data provider. Perhaps this opens up the international market to their agri specific data?

And that is all for this issue. I hope you have enjoyed it so far and do share with your network.

By Niall Haughey profile image Niall Haughey
Updated on
agrifintech farmers business network growersedge oxbury phygital