Greetings From SIBOS: Is A P2P and Financing Comet About to Hit Bank Factoring and Lending?

I attended SIBOS (a large banking conference put on by SWIFT) yesterday with my Trade Financing Matters colleague David Gustin. We co-presented (debated, in fact) at a lunchtime session focused on the potential for bank disintermediation in the trade financing area. I was, of course, on the side of the good and the great – namely that a new era of capabilities brought forth by the rise of purchase-to-pay (P2P), order-to-cash (O2C), e-invoicing and supplier/business networks combined with third-party capital sources is going to render the existing bank ecosystem a dinosaur in the trade financing area.

No doubt, this transition will not happen overnight. But we’re already seeing signs of it. Tungsten (see related posts, below) is out of the gate with its bank license in the UK. Taulia has developed TED and garnered committed capital to enable corporates the flexibility to fund or not fund early payment with their own balance sheet. Basware is partnering with Mastercard. And CrossFlow Payments is off to the discounting races as well with third-party funding sources and a full EDI replacement capability (which provides far greater visibility for direct spend/trade related documents than e-invoicing networks alone). And that’s just naming a few of the providers with varying degrees of liquidity on their networks today.

The banks are the ones that have been left out in this world so far – with few exceptions. The great majority of executives at these firms, based on our own experience, simply “don’t know what they don’t know” and are content with growing factoring and asset based lending books of business and/or intermediated trade P&Ls (e.g., Letters of Credit). They’re not aware of the comet that is coming. Some will move quickly enough (e.g., PNC working with Tungsten), but the majority will be shackled by legacy infrastructure, cost structures and compliance requirements – not to mention blissful ignorance.

The only question is when it strikes.

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