Supply Chain Finance Application Market Still Small

The market for applications that facilitate finance by providing a platform that augments information to transfer assets (in this case a supplier receivable) to Investors has seen tremendous amount of developments and press releases these last few years, but particularly the last few months.

There is one major reason why there is a rush by vendors to claim this space – banks are not lending. Banks say, and markets say, there is no loan demand. Is that true? Does small and medium size businesses need working capital? You bet. In fact recent data from the International Finance Corp indicates that the size of the financing shortfall globally is in excess of $2 trillion, and suggests that an estimated one-half to two-thirds of formal Micro and Small Medium enterprises lack proper access to finance. Opportunity right!

Does the commodity sector need capital? Does Emerging markets? Of course. What banks are saying is for the companies they are prepared to lend, there is reduced loan demand. The driver in all of this is banks have limited capital. See my recent posts on Eurozone stress tests and European Banks need to raise $700 billion

I estimated revenue for 16 vendors that provide a platform that augments information (note: 13 of these are private). I am not talking about vendors that sell software to banks, and the bank goes out and develops products and then originates, onboards, etc. I am talking about vendors that sell solutions to a corporate and provide a way for third parties to invest in an asset.

Most of this action is centered on what we call B2B or Supplier Networks that support early payment to suppliers. Think of vendors like Ariba, Basware, Tungsten, Taulia, and others. In the mid 2000s, you had two primary vendors offering finance solutions in this space, PrimeRevenue and Orbian. Both offered solutions for corporates to implement multi-bank funding solutions to the largest of suppliers.

I’ve analyzed the size of this market, and here are a few summary highlights:
• Worldwide revenue for these applications, networks and platforms is around $700 million.
• The top 5 vendors based on overall revenues (mostly network revenues and not finance) are Ariba, Basware, GT Nexus, Taulia and Tungsten.
• Revenue attributable to finance (either transaction fees from finance flow or basis points from using the platform) is still negligible.

The market is mostly full of private companies that do not provide public data on revenue. Only three companies are public (Ariba, part of SAP, Basware, and Tungsten)

If you would like more detail on my research here, I have produced a study on the above that is available for a fee. You can contact David Gustin at 1.604.924.0851 to learn more

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