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Why the U.S. can’t raise interest rates

- March 25, 2015 2:22 AM | Categories:

I found a very compelling argument, backed by some interesting data the other day on why the Fed is handicapped when it comes to rate increases, notwithstanding the current chatter around the Fed going silent. Dickson Buchanan, SchiffGold Precious Metals, wrote an interesting piece I would like to share. In it, he effectively spoke about how the Fed has shifted its asset duration away from short term to long term, while its liabilities are all short term. Anyone knowing anything around Asset Liability Management, knows this is a game that works as long as short term rates stay low. I […]

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AztecMoney provides Emerging Market receivable play for Investors

- March 24, 2015 8:09 AM | Categories: ,

calculating-calculation-calculator-3305 copy Aztec Exchange is an online platform launched in May 2013 to enable SMEs in emerging markets and credit-constrained developed markets, particularly in Europe, to sell invoices that they have issued to large foreign companies and their local subsidiaries. Aztec, which was set up by Oliver Gabbay and Edwin Hagan-Emmin, is based in Dublin and currently has 30 full-time staff. I recently spoke with Aztec Exchange cofounder Oliver Gabbay to understand more about what Aztec is doing to help suppliers, particularly in emerging markets, and learn more about how the Exchange is going. David: why did you set up the company? […]

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Can an Utility work for Know Your Customer (KYC) Requirements?

- March 23, 2015 5:15 AM | Categories:

index SWIFT had developed a KYC Registry for correspondent banking. The KYC Registry platform is operational with banks contributing their data. The goal of the utility is to enables banks to share and access the standardized set of qualified data and documentation needed to fulfil correspondent banking KYC obligations and customer due diligence requirements. Registry users will retain ownership of their KYC information, along with control over who can access it via the secure online platform. I spoke to one global expert who has designed and developed payment infrastructure to get his views on the KYC Registry. Maksim Rokhline is a […]

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Seller Based Invoice Marketplaces – To Sell or Not To Sell? Part IV

- March 18, 2015 2:57 AM | Categories: ,

1129141-2590-D31A-40A871BEE07DC548 Post four on Electronic Invoice Marketplaces looks at benefits and challenges of buying assets on an invoice auction market. Investors in exchange auctions can come from several categories: Banks (both small community banks to large global or regional banks) Commercial finance companies (asset based lenders and factors) Asset Managers managing money for Family Offices, Endowment Funds, etc. High Net Worth Individuals If Investors (or their asset managers) can overcome the fact they must bid for assets (eg. eBay style auctions are not fun), there are several advantages to an auction system. For one, it can allow you to diversify your […]

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How Procurement can use Unsecured Payable Finance to Secure Volume Discounts

- March 17, 2015 4:32 AM | Categories:

unsecured_loans While the pricing for Investment grade Supply Chain Finance program (or Reverse Factoring market) is ultra competitive with yields as low as Libor + 70bps, the sub-investment grade space has largely been ignored. Some banks have put their toe in the water to leverage their distribution and origination capabilities but few have really ventured aggressively in this space. There are lots of opportunities to help sub investment grade companies with an unsecured payables facility but few do not want to take the risk of not having secured liens on a supplier. Procurement organizations have an opportunity to take advantage of […]

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Indian Government to establish Electronic Trade Receivable Platform for SMEs

- March 16, 2015 2:27 AM | Categories: ,

RBI2 If you ever watched Seinfeld, you may recall the engagement episode when George Costanza gets engaged and Jerry is about to tell Elaine the news of George's engagement but before he does he teases her saying “All right, Elaine but this is beyond news. This is like Pearl Harbor. Or the Kennedy assassination. It's like not even news. It's total shock.” I kind of felt that way the other day when I heard The Reserve Bank of India is in the process of establishing an electronic Trade Receivables Discounting System (TReDS) financing of trade receivables of MSMEs, or Micro, Small […]

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Why Repayment Velocity Matters to Securitization Investors

- March 12, 2015 2:40 AM | Categories: ,

motion_velocity3_240x180 When Marketplace lenders establish new loans, the question of how repayment is going to work matters to investors, particularly those that invest in their securitization trusts. What happens if a payment is accelerated, or doubled, or missed? One big benefit of fixed-rate amortizing term loans is the clear structure of the scheduled payments. Think about your own mortgage for a second (and recall that you gave your lender collateral, your house, typically marketplace loans are unsecured). From an investor perspective, a portfolio of loans may have different repayment characteristics. This in turn impacts their future cash flows and return models. […]

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Seller Based Electronic Invoice Marketplaces – To Sell or Not To Sell? Part III

- March 11, 2015 3:28 AM | Categories:

dollar wallpaper This is our third post on seller based Electronic Invoice Marketplaces and looks at the parties and roles of an auction market. Who are the parties to an Invoice Exchange and what are their Roles? There are four major parties and sometimes five to an invoice auction model. The first of course is the Exchange itself, which acts as a platform and does not take any funding interest in the invoice itself. The role of the exchange is to make a market, and to provide an auction platform that controls both the bid process and the cash dominion and of […]

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Seven Supply Chain Finance Trends to Watch

- March 10, 2015 4:24 AM | Categories: ,

7-jackpot Supply chain finance is all the buzz these days by all vendors wanting to add that killer finance app to their solution. Certainly, networks, big data, new underwriting models, and non banks are enabling many companies that historically buy and sell to find new ways to finance their trade. What are some of the trends to watch for in 2015 and 2016: Non-banks have regulatory and compliance advantages over banks, but capacity will continue to exceed flow. Yes, investors are very tired of zero interest rates, negative yields on government bonds, but the hunt for trade receivables to invest has […]

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Are There Insurance Alternatives to Standby LC facilities?

- March 9, 2015 3:18 AM | Categories:

images Lets face it, getting a Standby Letter of Credit facility these days is not cheap. Standbys are used for numerous things, and are used as a credit backstop for both commercial and non financial transactions. Standbys represent an irrevocable obligation to the beneficiary on the part of the issuer to make payment when drawn. They can be drawn upon certification by the beneficiary that the account party has failed to fulfill its obligation to the beneficiary. They typically underlie some commercial activity, which could be a tender for a project (bid guarantee), an advance payment (advance payment guarantee), an installation […]

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Can Swift’s BPO be an alternative to the Two-Party Factoring Model?

- March 5, 2015 4:33 AM | Categories: ,

When companies trade cross border on open terms, it presents risks and usually extended terms, especially in emerging markets. In fact, the U.S. has become particularly risky in certain sectors – one only has to look at the recent news around RadioShack. So when a company sells to a foreign buyer and wants paid early, one possible alternative is to use a two-party factoring model. Many lenders may not want to enter the realm of foreign receivables and choose to exclude them all together when developing a lending program. The two-factor model is an interesting model. The International Factors Group […]

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Pushing Early Pay Options to all Suppliers

- March 4, 2015 3:28 PM | Categories:

Seriously, one has to wonder why this is not just standard business practice these days for many large companies. Do we really need the U.S. Government trying to come between private commercial contracts with the SupplierPay pledge? I know many global corporations have started to deploy some early pay solutions. Approved invoice solutions have existed for over a decade or more. But now, Purchase to Pay, eProcurement, einvoicing and Supplier Network solutions are getting more established together with early pay finance techniques. Large global corporations that use these networks to manage suppliers find options to enable their suppliers to receive […]

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