TFM Reader Mailbag

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Over the holidays, I tried to figure out how to incorporate reader correspondence into Trade Financing Matters to make the site more interactive and not feel like me speaking from a megaphone with the answers and insights to all what is happening in business finance.

I realize that the world is full of many new ventures that are and will change the way we do business – epayments, blockchain, 3D printing to name a few.  I also realize that the readers have insights that I will never have, as we are all a product of our history.

Right now, I am up to 700 email subscribers to my weekly digest, which is 2x where I started at the beginning of the year but no where near where I would like to be.  I think for TFM to take the next big step forward, it needs reader engagement – more commentary, more Guest Posts, more Q&A with readers, all done in a transparent format.  The last thing we need is a snarky anonymous participation.

So as a first step, I will incorporate some reader correspondence into Trade Financing Matters and will continue to do so in the weeks ahead.

Reader:  Are vendors seeing more RFPs around supply chain finance when implementing einvoicing or supplier network solutions?

Gustin:  In the past, vendors were not seeing a lot of RFPs specifically around supply chain finance, but this functionality was included as an element as part of a broader RFP.  Prospects and clients continue to hear a lot about trade finance and are looking for roadmaps.  Like, we are buying “x” functinality today, and down the road may want something around Trade Finance and want to know if that’s the direction you the vendor are going.

What vendors have told me is that while there are companies who view this as important, most do not deem as mission critical.  Instead, many will justify the rebate or dynamic discount fees as a ROI for the integration investment for the project.    Many large companies still look to their relationship banks.  There is a bit more appetite with dynamic discounting.

Reader: I am writing to you from Nairobi, Kenya. I’ve read your posts around Receivables trading.  I am exploring setting up such a platform in my country.  What are the challenges?

Gustin: Anytime you try and develop a marketplace of buyers and sellers it is hard.  In this case, the buyers are investors and the sellers are companies looking for finance.  As a third party platform provider, you are both a servicing platform as well as a broker.  The issue becomes who are you a fiduciary for? Are you one for the Seller, who has no payment obligation towards the investors over and beyond the amounts received from the Obligor.  Or are you one for the Investors, whom take risk and must know the platform executes properly, controls the cash dominion process, etc.

While on the surface this rush towards receivable trading platforms makes intuitive sense given market dynamics, it is hard.

Banker:   How can a bank use FinTech to drive some relationship lending?

Gustin: 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 middle market segments, a few banks are selling AP automation capabilities to help middle market companies ($100M to $1.5bn) process invoices from their supplier ecosystem, pay, reconcile and provide early pay opportunities.  Other banks are marketing reverse factoring programs to the larger, more stable middle market companies as well as unsecured payable finance programs

Or for small business, they are using filters to fund term loans originating from marketplace lenders such as Lending Club, Prosper, etc.  Some banks have also introduced auto ledger extractor products for the off-the-shelf accounting packages used by small to medium sized companies to do invoice discounting and factoring.

I encourage you to submit your questions, and also suggest if you have some interesting insights, become a Guest Contributor.  I am sure the readers would appreciate hearing more views than just my own.

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