Banks struggle to deploy supply chain finance technologies

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Many banks are trying to figure out how to provide supply chain finance capabilities to their clients and what technologies they need to support their infrastructure.  Trade is now becoming just another specialized lending product at banks, and leading banks are trying to figure out:

  • How to integrate trade finance with their factoring, commercial finance, asset based lending, invoice discounting and other bank lending areas.  Historically, trade finance sat isolated all these years, mainly due to some specialized documentation around letters of credit and standbys, and received beneficiary capital allocations due to the off balance sheet (ie, non funded) nature of the transactions.
  • How to take advantage of the key growth area - trade credit sitting on the balance sheet of corporates.  Solutions to enable early payment of suppliers are mushrooming, and eventually as networks and intelligent underwriting models are built - PO finance, inventory finance as well.

I am finding as banks look to build their future capabilities, figuring out how to work with the emerging network players - Taulia, Tungsten, Ariba, etc. is critical.  They cannot be an island of capabilities and need to develop that platform as a service model complete with a good end user experience.  These smaller vendors are leading the way, and the recent move by GE to work with Tungsten is a sign that more is to come.

It’s not just about putting in a back office trade system anymore with CGI or China Systems or building a proprietary system.  Trade Bankers have been too myopic, and in the days of cheap capital and lots of letters of credit, that was fine.   As Corporations supply chains evolve, and they move to more collaborated models, and as vendors help them connect their supplier ecosystems, the world is changing under the bankers’ feet and disintermediation or at least being just a payment provider is the result.

First Voice

  1. Srujan:

    Hello David,

    Could you please elaborate on” How to integrate trade finance with their factoring, commercial finance, asset based lending, invoice discounting and other bank lending areas”. I am looking for more information on various options that are available for the banks to integrate their SCF platform with other platforms

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