An update on Nipendo – Integrate Financial partnership adds on-demand, pre-approved financing

B2B and Supplier Networks are having a profound impact on Purchase to Pay as they continue to add payment, settlement, and finance capabilities.   Nipendo recently announced their relationship with Integrate Financial.

First, who is Integrate Financial?  Integrate Financial uses non bank capital to provide liquidity to procurement networks, payment networks, and others to provide financing for suppliers of large corporate buyers, usually Global 2000 companies.  Given they are a non bank source of funds, they are not encumbered by complex compliance legislation or Basel III capital, liquidity and leverage rules.   This gives them a distinct advantage when financing suppliers from these networks.

Nipendo and Integrate Financial will employ a range of advanced technologies to significantly reduce the risks and barriers typically associated with receivables financing. The typical risks faced by financing receivables, such as fraud and dilution, are greatly reduced.  To begin with, Nipendo ensures that only valid and error less invoices enter the buyer's Accounts Payable system. Before an invoice is received on the buyer side, it is per-emptively validated by the Nipendo platform for data accuracy and compliance with the buyer's requirements. In addition to data validation, invoices are also matched with purchase order and receiving records, all in real-time. Suppliers get immediate notification if an invoice is non-compliant, so they can correct any issues before the invoice enters the buyer's accounting system and avoid any delays. As a result, close to 100% of the invoices are processed and approved for payment within minutes.

Integrate Financial will leverage the performance data made available by Nipendo to offer near-real-time financing.

I spoke to Integrate Financial CEO Zalman Vitenson to get his perspective on the venture with Nipendo.  Below are some excerpts from the discussion:

David: Will you finance foreign and domestic supplier receivables?

Zalman:        We will do domestic for now, and certain dollar-denominated foreign.  We are exploring foreign at this time.  Toady, this restriction has more to do with the present set of investors, but there are many interested investors, and interest is growing heavily in the trade finance component.

David: What does a supplier need to do to access early payment?

Zalman: A supplier would need to simply approve the terms and conditions that allows for the receivable sale, which is an electronic signature.  This is also presently tweaked for domestic, we are exploring for different geographies.

David:          Do you require any kind of trade credit insurance?

Zalman:  No trade credit insurance is required today.

David: Is this a true non recourse sale?

Zalman: Initially, it is not true non recourse.  If there is non payment, underpayment, or bankruptcy, the supplier still owes.  Some buyers may be interested in providing a blanket guarantee.  If/when that occurs then that buyer's program does becomes true non recourse to the supplier.  However, even without a buyer guarantee, supplier/buyer history and ongoing transactions may re-qualify the supplier into a non recourse program, though at a slightly higher cost.

So what’s our interpretation of the impact of this announcement?

First, for suppliers, they now have an option they did not have.  It is a binary decision, and they can decide if the price for early cash is acceptable or not.

For non banks hungry for short term fixed income yield, these networks present an opportunity.  Given there is not an endless list of B2B networks and many are partnering, this will be a space to watch.

For banks, they will find significant leakage over the next few years as non banks enter the fold.  There are cases where a few banks have starting reselling solutions- see  C2FO teams with Fifth Third Bank and PNC's recent announcement with OB10.  The B2B commerce and Supplier Network space is exploding with partnering propositions and new entrants, impacting both bank channel strategies and the larger Purchase to Pay market.  Many banks are trying to understand how corporates are using these networks and what it means for their existing technology infrastructure around supply chain finance and working capital.

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