Banks Need to Improve Predictive Analytics for Supply Chain Finance Programs

Dickie Greenleaf: Everyone should have one talent. What’s yours?
Tom Ripley: Forging signatures, telling lies … impersonating practically anybody.
Dickie Greenleaf: That’s three. Nobody should have more than one talent.
– “The Talented Mr. Ripley” (1999)

One talent area Banks need to be more like FinTech is the use of Predictive Analytics when developing an approach strategy for suppliers to onboard for supply chain finance.  Even Dickie Greenleaf would agree.

Take P&G for example.  Banks look at a vendor list and spend report from P&G and see that this supplier spends $10M with P&G, and that’s it. But if they did a real commercial analysis, it would make a huge difference.  Banks aren’t doing their complete homework, and therefore it’s the 1% solution.  If banks did a better job of segmenting who these suppliers are, the banks would know who to approach and how to approach them. In many cases, they don’t use any meaningful data beyond spend data.

KYC laws allows banks to reinforce the message the hard work of getting suppliers onboarded.  But if some company can go into Facebook and run a tool to suck out the data of 50M Americans, why can’t the banks be better?If you did the commercial analysis, out of the 15,000 names you get, you could focus on the right 1,000 names.  That’s the trick.

Where Banks can be better

Develop a Working Capital Analytical Pre Onboarding Tool

As a bank supply chain finance originator, do you have a working capital analytic tool to help companies assess their spend file and the likelihood for supply chain finance, including payment term benchmarking, etc.?  What data does your tool analyze (ie, vendors payment terms vs standard, cost of debt, percent of buyers business, credit rating, etc.)?

Specialty lenders and FinTech platforms are using technology to get instant data feeds to push beyond the conventional information sources.  While banks have made great strides in integrating approved invoice data onto platforms, taking it a step further and being able to do fraud and threat detection, social network scores, and other third party databases such as gurufocus, capitalIQ, etc. to get supplier information, plus other databases to get judgment and lien searches can be done in formats that are data friendly.

What to do with all this data?  You need to scrub and analyze it so you can take 15K suppliers from P&G and narrow it down to the 500, and then offer the best opportunity.  That comes next, with a supplier enablement tool.

Use a Supplier Enablement Tool

Your team should be looking beyond spend reports to determine who to call, when, and what are characteristics of the supplier’s cost of debt, and their costs under current payment terms.  When your enablement team reaches out to suppliers with his data in hand, conversations are richer.

Leading FinTech providers’ supplier enablement solution generally:

  • uses rich information to determine how to contact suppliers
  • has a myriad of ways to engage suppliers to accept early pay money, including- Face to face, Call center, email, and mail.
  • has workflow tools to track the dates each task is finished or provide time to complete each event
  • can track supplier early payment behavior to continually ensure early payment offers are optimized to the supplier

Granted, FinTech companies do not have the same KYC/AML compliance issues banks have.  But the silver lining is we know FinTech companies have leveraged technology to onboard more suppliers at faster rates than banks, and there are lessons we can all learn from their efforts, even if they do not face identical requirements.


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