Banks need to make Supply Chain Finance more User Friendly

contingent workforce

There is an argument that banks are not making their SCF programs easy enough to implement.   Paula Da Silva, SEB head of Working Capital, went so far as to say not only are we not user friendly, we are not Apple where you just download an app. Her point focused on the cumbersome and time consuming process of setting up a supply chain finance program and then going around to a respective subset of vendors to use a portal.

Can we make these reverse factoring programs App Friendly as Da Silva suggests or is she caught up in this fintech craze like most? Alternative Finance and marketplace lenders are not setting up complicated programs like supply chain finance. In essence, bank supply chain finance programs are all about term extension with a carrot at the end. In effect, one is using data analytics, new models of underwriting and sweet interfaces to provide adhoc finance, or small business term loans. In reverse factoring’s case, banks are outright buying a receivable, typically from an unknown customer, that must go through a registration and KYC process. So we are mixing apples and oranges.

There are a number of pain points with supply chain finance and reverse factoring programs. Certainly program management & onboarding requires dedicated resources around supplier risk, procurement, and a financial team member to help with onboarding as Da Silva suggest.

There is no doubt banks can get much better with their user interfaces. I think setting the bar as high as trying to emulate Apple and their storefront is admirable, but banks are not app sellers. There are others directly involved in B2B credit that are doing interesting things with platform as a service and finance (see recent Tradeshift – C2FO announcement).

As Jason Busch mentioned in a recent post, “Banks have a massive opportunity to deliver additional value to corporates. Yet the majority we speak with fail to see how they can complement (and improve upon) offerings already delivered through technology providers today or those offline products they offer today outside of select programs that they may already have up and running.”

Here are a few suggestions for banks:

  • Banks should look to incorporate the capabilities of best-in-class B2B and Supplier Networks tools today. Perhaps even consider having your own platform-as-a-service capability which it can expose to customer (buyer/supplier) systems and processes – and that which can also interact with third-party P2P and O2C capabilities (including systems, networks and other platforms)
  • Implement one of these einvoicing / supplier network tools yourself so you can pay your supplier ecosystem. Learn the challenges with onboarding, experiment with early pay, etc. before you aggressively try to sell this to your own clients via your Treasury solutions group.
  • Find ways to exploit your traditional payments, FX, cash management, and Trade finance offerings to integrate e-invoicing and accounts payable automation offerings.
  • Provide focused verticals solutions (egs. Media, Healthcare, Oil & Gas), where there is a great need for innovation around payment, working capital, and settlement. Find the solution providers that are making inroads here.

If you’re in the banking world and want some tips on coming up to speed in the rapidly evolving world of tech-enabled trade financing and treasury programs, don’t hesitate to reach out.

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