5 Catalysts for Third-Party Funding of E-Invoicing

Yesterday, I covered some of the challenges surrounding the adoption of third-party financing across e-invoicing solutions and supplier networks. There are multiple theories out there that can explain why third-party lending to suppliers through these platforms is so embryonic, as I explored in the above analysis.

But perhaps the more important question is: What will it take for these solutions to cross the chasm from theory to action?

I have some hypotheses. Either individually or collectively, it will be fascinating to see how these come together:

1. SMB Use Picks Up

Small and medium-sized business penetration across e-invoicing networks will pick up and provide a greater number of opportunities to increasing financing uptake, both cutting into the existing p-card market as well as creating virgin territory for bank and non-bank intermediated third-party financing through online services.

2. Emerging Markets Embrace It

Emerging economies and markets where financing is most needed will increase their use of e-invoicing solutions and supplier networks. Suppliers will be able to leverage both the balance sheets of multinational investment-grade corporates as well as private funds for early payment, creating even greater arbitrage opportunities for investors compared with standard developed market trade financing APRs.

3. Credit Cards Innovate

Card providers will expand their offerings outside of existing p-card programs to fund early payment. My money is on Mastercard, based on its existing relationships with Basware and Coupa, among others, to be the most innovative here among the card companies bringing new capabilities to market.

4. SAP Steps Up

SAP and Ariba will finally get their trade financing act together. Ariba has labored in this market forever with great ideas, pre-dating even the start of Taulia. But SAP has never been able to build traction for its early payment and discounting programs, especially those involving third-party funding. (Remember the Receivables Exchange partnership?) Given Ariba’s network volume and SAP’s overall market reach, new activity in this regard should happen in only a matter of time, perhaps with greater uptake and participation by third-party lenders.

5. Private Equity Rolls the Dice

Private equity firms stop researching, banks stop dabbling and both begin to place some serious bets on the market – and in the latter’s case, really begin training treasury management and commercial lending organizations to push programs at scale.

What do you think? Feel free to add your own proposals and solutions below.

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First Voice

  1. Robert Solomon:

    All spot-on comments!

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