Trade Financing and P2P Technology: How Can Banks Get Smart on Technology and New Client Solutions?

Technology vendors and procurement organizations often ask us about the steps banks are taking to deliver integrated purchase-to-pay (P2P) and related programs as part of their solution portfolios. The answer is actually a bit depressing: Most banks are doing surprisingly little today, and the programs they do offer in the trade financing area tend to rely loosely on technology at best.

In fact, we can count the number of banks and their client-facing organizations with an in-depth knowledge of such solutions – let alone the ability to resell or offer such capabilities directly to treasury customers – on a single hand.

The sad part, of course, is that banks have a huge opportunity to participate in the new world of fintech and have far better relationships to drive the adoption of solutions – not just their initial sale – within their current client base, especially the middle market.

But how can banks get started? When we work with bank clients from an advisory perspective, we often recommend starting by being able to answer a few key questions:

  • What can technology do to enable new approaches to payable and receivable financing and treasury services? What is the “state of the art” in programs today? For example, we have seen banks build both invoice processing centers, complete with finance, foreign exchange and payment capabilities, and receivable processing hubs.
  • What are leading edge banking organizations delivering today? What has driven them to develop such programs and who are they working with in the technology provider area?
  • Are bank customers really interested in leveraging bank-centric solutions in these areas (e.g., accounts payable automation, electronic invoicing, invoice discounting, supply chain finance, card programs, reverse factoring, factoring, etc.) or are they embracing alternative programs?
  • Should banks invest in developing or re-selling e-invoicing technology? Which organizations are most “partner” friendly?  Are partnerships working?
  • What are clients doing today in trade financing and P2P today outside of their banking relationships? What are they doing to optimize working capital? What is normal? What is bleeding edge?
  • How are companies moving away from offline letter of credit (LC) models and embracing online approaches to both open account and non-open account cross-border transaction models?
  • What role are card companies starting to play outside of the traditional corporate and purchasing card roles?
  • What solutions are clients considering when it comes to payables, receivables and inventory for working capital? What are companies doing in the broader order-to-cash area?
  • What type of role is analytics playing in P2P, trade financing and risk management? What is coming in the future? What products can banks offer in this area? For example, using data science to apply to lending decisions, more banks are turning to white-labeled platforms to make small business lending decisions.
  • Are there disruptive models, such as peer-to-peer lending (i.e.., credit analysis based on data vs. other approaches) that banks should be aware of and include in their roadmap and solutions?
  • How can banks extend existing internal systems to become externally facing in these areas?
  • What do tech-enabled legal and regulatory frameworks and best practices look like for different areas, including approved trade payables finance (i.e., supply chain finance)?
  • What tech companies are easy (or difficult) to work with – and why?

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.

If you’re in the bank 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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