Banks Trade & Supply Chain Business Under Silent Attack

Why banks should care about new models of open account trade credit?

Banks have developed trade and supply chain finance capabilities to service the open account trade flow. For the most part, the success here has been limited, as banks typically serve only one side of the transaction and have limited structured data outside of purchase order and invoice data.

As Jason Busch commented recently, “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 challenging the existing bank ecosystem in the trade financing area.” Jason called it the comet coming.

Much of what the banks have done is little more than offer PO and invoice matching services, sometimes automated and sometimes manual. These have led to various receivable and payable offerings. Much of this started back in the late 90s, when TradeCard burst onto the scene with a SaaS collaborated model for international purchase to pay (note TradeCard was merged into GT Nexus by their common private equity partner in 2013). Banks scrambled to catch up, and either built PO – invoice matching capabilities themselves, or used vendors. Most notable was S1 (since acquired by ACI Worldwide) and CGI.

CGI offers a SaaS solution to banks called Trade360, and claims 20 out of 50 of their products are oriented towards open account. It is attempting to help banks move beyond traditional products to support a range of seller and buyer centric solutions, including pre-export financing, receivables finance, receivables management and a supplier portal for sellers to participate in approved payable finance programs with their buyers. Other vendors selling solutions to banks to do this include Misys, China Systems, Surecomp, Temenos, and a few other regional players.

Both Union Bank and ANZ are now making integrated receivables available to corporate sellers. Integrated receivables enables corporate sellers to reduce the time and effort involved in reconciling payments to invoices by enabling a bank to automatically match consolidated incoming payments to invoice data provided by customers. Union Bank has started a pilot project with integrated receivables and plans to use it across its geographic footprint in the US.

But banks only see content from one side of the relationship. This is a big problem, as networks have a major advantage here with both buyer and seller data. Banks may claim to offer buyers a portal to capture purchase orders and invoices, but they do not have the sophisticated structured data that can match against agreements and POs, invoices, etc.

The other challenge is that many of the larger corporates on the payable side have already moved to some e-invoicing or e-procurement application with some of the leading vendors like Basware, Taulia, Ariba, etc. Recent announcements from the likes of Exxon (Basware), GE (Tungsten), and Siemens (Tungsten) to automate transactions for their global business and suppliers has proved this out.

So where does that leave the banks? Where banks may have a fighting chance is with the middle market, where the banks combination of relationship lending, invoice automation, cash management, payment, and finance enables middle market customers to use just one vendor for this functionality.

P.S. sign up for Trade Financing Matters weekly newsletter here

Share on Procurious

Discuss this:

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.