Yesterday, Tungsten made the headlines – the front page in fact – of the Financial Times’ Companies and Markets section: “Tungsten Bank sets its sights on providing small business finance.” The FT covered the news that Tungsten had completed its planned acquisition of FIBI Bank, which will now be renamed Tungsten Bank.
The FT writes that “the move means Tungsten will not only be able to process billions in suppliers’ invoices for large companies such as General Electric, but also advance cash to suppliers that need money immediately … [through] a cheap form of funding in the form of bank deposits.”
The article further observes that Tungsten competes “mainly against” SAP. Spend Matters analysis would add that it competes against Basware, Tradeshift, IBX/Capgemini, Crossflow Payments, Nipendo, Hubwoo, Taulia, Oxygen Finance, and many others in a highly fragmented e-invoicing, supplier connectivity, and nascent trade financing market in which no provider has dominant market position yet – and where the bulk of trade between companies still goes through EDI-based connectivity models and not general business networks (at least not yet).
SAP/Ariba are competitors, no doubt, but by no means are they Tungsten’s primary foe. In fact, one could argue in the broader world of trade financing, Ariba has fallen behind others in adoption and that the largest future competitor for Tungsten might be perceived as an orthogonal competitor (e.g., a company using Taulia and a combination of its own balance sheet and third-party capital to finance early payments itself, in effect turning accounts payable as a profit center).
Competition aside, the more important question is whether the bank license will give Tungsten an advantage over other models that have committed capital behind them. Depending on country and perspective, it would be possible to argue that having a bank attached to a network is either a positive or negative.
For example, in the US, it might be seen as a hindrance, as JPMorgan Chase discovered when it shut down Xign based in part on the risk associated with enabling (not necessarily even financing) early payment transactions involving circumspect suppliers (e.g., denied parties list). But contrast this to the UK, where it might confer significant advantages, especially in suppliers’ eyes and where regulators care more about supporting small businesses and the economy than the over enforcement of regulatory policies.
Regardless, the combination is fascinating indeed beyond just the novelty aspect of it. And it’s been a long time in the making, with almost a year passed since Tungsten announced its bid to acquire OB10.
Spend Matters looks forward to covering Tungsten and its financing initiatives alongside other models in the market. And we look forward to seeing the mainstream business press like the FT cover the topic on a more consistent basis. But most important, may the best, most consistent, and lowest cost trade financing option for suppliers win.