In Pete Loughlin's analysis of Tradeshift's latest move to combine an early payment financing element with its free electronic invoicing capability, I find it rather curious why banks are made out to be the enemy (or at least the implied enemy). Pete suggests that Tradeshift's move to offer real-time payment capabilities "puts the spotlight on banks" which have "been in a position to offer this kind of supply chain finance for years yet they have failed to step up to the plate." Without question, there is more that banks could be doing in such a model. But there are a number of things that some banks are quietly doing behind the scenes in the area of supply chain finance (very quietly I might add, in the more inventive cases) such as driving early payment discounting programs that integrate with e-invoicing environments, providing financing for as low as LIBOR + 300 basis points. Banks lower their risk in this transaction by financing the early payment discount using the cost of capital of the buying organization vs. the credit history and related demographics of the supplier.
I have no doubt that the low supply chain financing cost in the above scenario would provide a very significant discount off of what Tradeshift is able to offer (and also far undercuts the obnoxious p-card financing rates). Yet the bigger challenge I see for this model is not the ability of banks and others to offer discounting programs tied into electronic invoicing initiatives at a more attractive financing rate, but rather the ability of Tradeshift to build this solution into purchasing, payables and sales ecosystems as one payment and e-invoicing option/mechanism that can integrate with a broader solution rather than just standing alone. And even to successfully achieve just this in large enterprise environments and middle market organizations, Tradeshift will need to cozy up to not just procurement and A/P, but also treasury, stepping on the heels of banking relationships that have existed for decades (or more).
Tradeshift is pushing the limits of a market that needs a hefty shove. It's bold, it's cool, and it's exciting. But I'll be more comfortable with the model and its ability to support the partial electronic invoicing and early payment program needs of larger organizations when Tradeshift begins to show some proof points of integration into the real world of procurement, A/P, treasury and IT, including having some real use cases involving companies that also rely on vendors like SAP, Basware, Oracle and Ariba.
If you want to understand how this world operates -- or at least how it should operate today -- from an electronic-invoicing standpoint, you can download our latest paper on the subject: E-Invoicing Comes of Age -- Discovering What's Possible From the Latest Electronic Invoicing/ Invoice Automation Capabilities, by clicking here).