5 Reasons Why Banks Will Win the Trade Financing and P2P Game – Someday!

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Banks have a massive opportunity in delivering purchase-to-pay (P2P) and tech-enabled trade financing solutions to clients. Some are already taking the plunge. Many others remained mired in a credit-only world.

Yet they all have a tremendous amount to lose if they don’t get these programs right in the coming years, as alternative lending and treasury service models take flight – and as technology providers, consultancies and outsourcing firms become more strategically positioned to influence CFOs and treasurers generally, potentially marginalizing banking relationships.

But in our experience, most banks have not yet started to ask the right questions to understand both the risk and opportunities posed by tech-enabled e-invoicing, P2P, approved trade payables financing (supply chain finance), reverse factoring, invoice discounting, broader card (not just corporate card), payment and other offerings, among others.

Still, some banks will no doubt get their mix of offerings right and get smart on the market sooner or later. Here are 5 reasons why:

  1. No tech provider we know is in a position to see all of a customer’s working capital and treasury management needs. They simply don’t have the existing relationships nor the understanding or patience to develop a long-term perspective on what solutions are an ideal fit overall versus on a point-solution basis.
  2. Most tech vendors simply don’t understand how to sell and work with treasury and CFOs. Essentially the only providers that have relationships in these areas sell basic solutions that help manage current and forecast cash positions or help with collections.
  3. Payments remain an exceptionally confusing and broad area as new solutions emerge and one that has high compliance requirements. Banks are ideally positioned to support customer needs and requirements and to integrate payments into P2P and trade financing programs with customers. The tech ecosystem system here remains exceptionally fragmented and customers need a general contractor – or Sherpa, if you will – in the form of informed bank relationships to guide them through the possibilities.
  4. The opportunity for tech-enabled trade financing tools is huge for both buyers and suppliers. Yet bridging the gap between transactions and managing working capital holistically is an offering banks are ideally suited to fulfill and a combination of solutions for customers is likely to prove most effective.
  5. Banks have the know-how to securitize lending programs and sell and trade risks to third parties at scale. As trade financing technology models and approaches mature – and as new models emerge – banks are in a pole position to lead new financing vehicles based off of visibility into buyer and supplier systems and various trigger mechanisms, including invoices and purchase orders (POs). Counterparty relationships matter more than just about all technology firms know.

Banks are in an exceptional position to take advantage of the renaissance that is just kicking off in the tech-enabled trade financing area. While many of those tasked with investigating such programs today may feel their employer is in the dark ages still, they shouldn’t fret. The good news is that it’s a long-term game to play – and those that are just beginning to investigate their options aren’t necessarily behind their peers.

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