Payable Finance Myths & the Digital Age -Top Priorities of Major Providers

During the Lendit Fintech USA conference that I spoke at last week on digital supply chain finance lending, the attendees biggest interest was in two areas: Artificial Intelligence and how it can supercharge lending and Blockchain (I counted over 30 Blockchain presentations for the two days + a separate morning Workshop session).

On the small business and consumer lending side, both the “old” innovators and the new entrants were present.  But when it comes to Payable finance, nothing beats an approved invoice.  With an approved invoice, regardless of all the other data you can gather about risk of that invoice being paid, if Coke or HP say they will pay, strong likelihood of being paid.  Yes there still can be dilution post-confirmed invoice from contractual volume discounts, tax issues, judgments, counterclaims, and other nonspecific invoice related withholdings.

We know Payable Finance is evolving with source to pay type networks (egs. eProcurement, Sourcing, Invoice to Pay, AP Automation, Audit risk firms, Supplier information management, etc.)  In my recent ebook, Busting the Payables Finance Myths in the Digital Age, I synthesized discussions with some key providers of early pay solutions in the market to understand some of their priorities in 2018 and beyond.

From these discussions, I see several initiatives:

1.    Corporate Treasurers desire for flexibility to manage working capital on one platform.

Most companies will have one or two primary objectives around working capital that is related to payables.  It could be yield, margin improvement, or debt ratio management.   Companies would like to have added flexibility to segment their spend and do ‘either or’ on a single platform. It allows companies to offer buyer-funded (Dynamic Discounting) early payment offers and third party funded (SCF) early payment offers to suppliers within the same platform and same supplier portal user experience.

This forces solution providers, whether banks or vendors, to expand their platform offering.  Today, many will segment suppliers to access separate platforms for Dynamic Discounting early payment offers versus third party early payment offers.  Part of this is just implementing programs at different times with different parties.  But we see both banks adding capabilities to their platforms to round out buyer self-funded early pay and vendors adding more capabilities around hybrid models and third party funding models for their solutions.


One caveat here is banks like to make interest spread, and self-funded early pay is a service which they then would have to charge for either via transaction fees, platform fees, or some gain share split, if they charge at all.

  1. Improving Supplier Adoption of Early Pay programs

Treasurers are keen in understanding how solution providers can improve the supplier experience and reach more suppliers, like the next 5,000 suppliers who need cash and have had or will have term extension.  Onboarding suppliers takes resources to do well.  It is time consuming and costly for a solution provider and the company.  We are seeing top providers using predictive analytics tools to improve supplier enablement.

When an early pay offer is made to a supplier, there are a lot of innovative analytics going on to determine who and when to contact, what rates to offer, and track supplier early payment behavior to continually ensure early payment offers are optimized to the supplier.  P2P network vendors analyze the supplier network behavior on taking early payment with multiple buyers on their network and can provide this information to their clients.

The top reason suppliers use early pay finance is for predictable cash flows and meeting DSO goals.  We know that when suppliers opt-in to early pay programs, they receive certain cash versus waiting for the 45, 60, or 90 or more days to get paid, hoping their invoice isn’t diluted, and losing an extra few days because they miss a payment file cutoff (because their customer makes bi-weekly payments).  Rates tend to be less important for early pay finance use.

Solution providers are also adding reporting capabilities so companies gain self-service visibility to supplier enablement (eg, eInvoice adoption, supplier enrollment (or non-enrollment), early payment adoption, time of early payment request, etc.

3.    Rise of Marketplace Lending Models

We are just starting to see the introduction of new FinTech and lender partnerships that are focusing on bringing Marketplace lending models to various business segments  This model is typically focused on automating the underwriting for lines of credit or dynamic credit limits <$1M. Seller centric models based on networks are still relatively new.

The focus of these new partnerships is to move away from a buyer-centric model to one that works with various vertical and generic networks to offer sellers on the network a facility that is close to as one-click as possible.

Invoice data coming from Corporates or P2P Networks would be sources of invoices that have been reviewed and approved.  This data is much more reliable than data from a seller’s accounting package, which will have receivables data just from the seller’s system. These new models take network data and offer dynamic credit line facilities to sellers. These models rely on API technologies and screen scraping to access data needed to underwrite and develop a lending package.

4.     Leveraging ERP data to enable funders to provide invoice finance on a non approved invoice

Access to data, artificial intelligence (“AI”) and machine learning is leading some to believe financing decision will be driven more and more by AI and machine learning.  The diversity of data sources is thriving (from digital supplier onboarding data to third-party data API), providing a multi-dimensional view of performance risk. No place is that more evident than ERP data.

There are a number of companies that are racing to use data to do a better job of financing invoices and predicting dilution although this is not a trivial exercise.


 GBI has produced five Supply Chain Finance Guide publications (prior publications in 2007, 2009, 2012, 2014, 2016).

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