As most of us know that have sent a payment across borders through banks, I can travel from Vancouver, Canada to Barcelona quicker than money […]
Many tech providers look at supply chain finance as a technology issue. An effective platform must take in invoices, provide dispute management, credit notes, audit […]
Banks have historically been the dominate provider of both platform and funding of reverse factoring (commonly called supply chain finance) programs over the last decade. […]
Leveraging Technology on the Buy-Side in Planning for Higher Interest Rates and Restricted Bank Lending
Throughout this series, we have explored the role that the risk of rising interest rates and reduced bank lending to small and medium-sized businesses is likely to play in driving up supply risk, along with some of the foundational procurement-centric technologies that can help. Today, as we conclude this exploration in the final installment of this series, we’ll highlight just a few of the trade financing techniques and technologies that can help procurement organizations play a leadership role in proactively preparing for and addressing supply risk.
A Technology Foundation to Reduce Supply Risk With Higher Interest Rates and Restricted Bank Lending
The combined specter of rising interest rates, reduced bank lending to small and medium-sized businesses, demand/supply variability and economic growth prospects in a number of European and Asian countries – most notably China – suggests a rather dangerous supply risk cocktail is brewing for procurement organizations.
In the first installment of this series, I provided an overview of why these challenges matter and can contribute to supply risk. Today, I’ll share how specific solutions can help address these challenges – and build into applying trade financing techniques in the most targeted and strategic manner.
Love it or hate it – you’re likely in the latter category if you need a new hip or knee – the National Health Service (NHS) is a model of transparency compared with many health systems throughout the world. But that transparency has not extended to accounts payable and supplier management activities on a systematic basis to date, although individual health trusts have worked their own efforts with solid results. (As an example, Steria and Tradeshift have success with a small corner of the NHS.)
Yet change is coming. In a recent column in The Information Daily, Basware’s Steven Carter highlights how UK central government is taking steps to make prompt payment standard within the NHS, which depending on your perspective, requires e-invoicing.
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.
I recently shared some quick thoughts on the evolution of Basware, a provider that is arguably making a complicated set of transitions, perhaps even more complex than what Ariba went through as it morphed from an enterprise software company to a cloud- and network-based purchase-to-pay (P2P) vendor, before SAP acquired it. But I would be remiss in commenting on Basware without referring Trade Financing Matters readers to a great post, Basware = Sciquest + Tungsten?, by my old frenemy, Bob Solomon. Bob’s got a heart of gold, but he’s also the one who came up with the Ariba network pricing model while running the Ariba network business – which practically makes him the equivalent of a Sith lord.
If you ask most people on the street what P2P stand for, they’ll say, “peer-to-peer.” But if you ask someone in procurement or accounts payable, they’ll say, “purchase-to-pay.” But will this distinction even matter in the future? I believe the two are poised to come together, in part, when it comes to the need for better information to drive the business lending, payables financing and receivables financing markets. If you believe the headlines, such as P2P business lending to eclipse consumer sector, in the Financial Times, peer-to-peer business lending is set to take off. This lending format, where individuals or non-bank entities loan money directly to others in the business sector, is set to eclipse similar consumer-type loans.
Basware doesn’t enjoy sitting still. When I first dove into the provider in the early days of Spend Matters, it was deeply rooted in the enterprise software business with arguably the strongest accounts payable automation capability, as well as e-invoicing, limited e-procurement and even core financials, which is where it began serving the needs of Nordic companies. The company appears to be making greater strides in its cloud offerings in recent quarters as the product set has matured, but the big question is whether Basware’s P2P, e-invoicing and supplier network capability is just a Trojan horse for a new business model built on financing.
I’ve recently talked to a number of companies under $1 billion and know how much they struggle with creating a digital world for their supplier ecosystem. They […]
Yesterday, I covered a number of challenges around the issue of early payment solution provider proliferation and supplier confusion. Yet it is excitement and change in the market that is in large part leading to the confusion itself. What’s driving part of the excitement – actually a large part of the excitement in procure-to-pay-based lending – is the data that sits inside networks like Tungsten, Basware, Taulia, Nipendo, Ariba, GT Nexus and others. The combination of this data with external data is nirvana for anyone with a doctorate in statistics or mathematics. As with program trading on Wall Street, you can model risk and behaviors.