In payments, someone has to enable the vendor to receive that payment. In the days of cheques, it was and still is easy. All you need to know is your supplier or vendor’s address. In the days of ePayments, you have to collect information from the supplier in terms of: What kind of payment they accept, How they want to accept them Who the contact point is, If accepting ACH, the account number and routing number If accepting Wire, the bank routing instructions, etc. If accepting Card, bank account details and remittance information. This information has to be maintained, managed, […]
A week does not go by without another a bank announcing a partnership with the latest fintech vendor or rolling out the latest payable or receivable treasury/trade product. Recent announcements include: ING – Basware Regions – Fundation US Bank, Bank of America, Fifth Third – Viewpost Fifth Third - C2FO PNC – Bill.com, Tungsten Networks Banks are making broad bets to fill product gaps for their supply chain finance and payable/receivable solutions, broken down by customer segments. For example, with the mid market, some are starting to ramp up selling AP automation capabilities to help these companies (typically with sales […]
Looking at various business models that involve “selling” suppliers money, vendors’ projections versus reality can be far apart. The first challenge is when you sell money, many times using call centers. The analogy I like to use is some investment advisor cold calling me and asking about my personal portfolio. Huh? You want to know details about my investments, but we have no relationship or trust. Selling money involves negotiation selling skills. It’s not always as simple as uploading an invoice on a platform and getting some money on an ad hoc basis.
I have been asked countless times about how vendors get compensated when they enable finance. The question typically goes, “How does Taulia or Basware or C2FO make money off finance?” The answer is not so simple — an implementation fee, a subscription fee and perhaps a 20% to 25% gain share on the income earned. Who knows? What you really need to understand is who should get compensated for risk and what’s the value of information to funders. For many banks that have funded vendors, the value on the approved invoice is the integration work that vendors have already done.
Trying to determine just how much alternative business finance is occurring in the form of payable and receivable solutions versus mainstream lending is not a straightforward task. As we mentioned in a previous post, for the majority of alternative finance B2B providers, information on size, volumes, etc. is kept private, no different than trying to find the payment terms and commercial agreements between a Bechtel and a Sunoco or IBM and one of its engineering suppliers. That data is just not public.
Yeah, I knew that headline would grab attention. And it can come off as arrogant. But look, I have a right to be critical of consultants (yes I was one many eons ago with Booz Allen & Hamilton). And in Mckinsey’s latest Payment newsletter (Oct 2015) the article Supply-chain finance: The emergence of a new competitive landscape they confused the market by how they lumped vendors together. How so? Well it gets back to the fact that everyone is racing to cover all thing fintech as it relates transactional finance and doesn’t fundamentally understand the different business models. So companies […]
The term supply chain finance is not universally accepted nor well defined. As more and more vendors enter the transaction finance space, we need to better understand how traditional lending models and credit facilities function versus supply chain finance, early pay techniques, and various seller based adhoc funding models. Many businesses that rely on credit facilities and other traditional lending products (asset backed loans, terms loans, etc.) with their banks or commercial lending companies have found that options are opening up like never before. I am not talking about all the marketplace and peer to peer lending companies, which are […]
The Securities and Exchange Commission votes on Title III of the JOBS Act On Friday October 30th the SEC voted in favor of Title III of the JOBS Act allowing non - accredited investors, which is the majority of Americans, the option to invest in crowdfunding. Title III is expected to be fully implemented in 180 days from now. As a result, any person or company with an idea can now solicit up to $1 million in funds from the average Joe or Jane without going through SEC regulatory rigmarole. Why is this important? Well, now the average Joe or Jane, once […]