Category Archives: Alternative Finance

Why Payment Companies are Missing an Opportunity with Early Pay (Part 2)

Small Business Credit

David Gustin is the chief strategy officer for The Interface Financial Group responsible for digital supply chain finance and is a contributing author to Trade Financing Matters.

As we pointed out in our last post, payment companies are looking to convert paper checks to cards, and this is drawing interest from many firms, from private equity investing into payment companies to acquisitions (e.g., Fleetcor acquiring Nvoicepay, Visa buying Earthport). The key weapon of payment companies is to leverage interchange fees to entice their clients (buyers) through rebates and extended terms to provide an early pay option for suppliers, typically with a discount from the invoice of 2% to 3%. Yet there are several reasons why a “card only” strategy from payment companies is suboptimal.

Why Corporates Cant Fund Early Pay Programs (Dynamic Discounting + SCF)

We hear so much about how flush American companies are with cash. Pundits are out there talking about how much cash corporate America has. But this story is highly misleading. Five percent of S&P 500 companies hold more than half the overall cash; the other 95% of corporations have cash-to-debt levels that are the lowest in data going back to 2004, according to Wells Fargo research. We know who those 5% are — they are the GAFA companies: Google, Amazon, Facebook and Apple. Corporate debt is exploding, and can be more addictive than crack or opioids. Debt is fine when things are going well, but when revenue stalls, bad things can happen.

How Fintechs Can Use Non-Banks for Supply Chain Finance

David Gustin is the chief strategy officer for The Interface Financial Group responsible for digital supply chain finance and is a contributing author to Trade Financing Matters.

In my last post, Many Fintechs Still Rely on Bring-Your-Own-Bank Strategy for Supply Chain Finance, I discussed how source-to-pay platforms and other cloud software providers still rely on their clients’ house banks for supply chain finance and why that might not be the wisest strategy given the times. So if you are a Fintech and want to offer supply chain finance, what are your options beyond a house bank strategy?

Has Off-Platform Lending’s Time Finally Arrived?

Now, digital B2B lenders can use fast data to scour thousands of individual data points — to instantly create a dynamic credit limit for companies that work on a particular supplier portal but only have a small percentage of receivables running through it. By having an off-platform model, this company can fund as many invoices as they want until they reach their credit limit. Virtually every supplier can be funded — only those in bankruptcy or on government watch lists are ineligible. This new form of B2B lending marries two core competencies.

Using Information Advantages to Finance B2B Transactions

We've all heard the stories around how supply chains are digitizing. A real transformation is underway, no doubt. But transformations don’t happen overnight. Likewise, traditional forms of financing supply chains still dominate. Many new models of lending have emerged over the last few years that rely on the approved invoices and third-party money, and while some models have generated volume, these pale in comparison with total B2B transactions. This is not to say there are not failures. In fact, the innovations that have been tried and failed lead to further innovation, piggybacking off of lessons learned. 

Can Lenders Learn from Google’s Artificial Intelligence Story

Real Time Loan Underwriting with Partial Data   At Lendit Fintech last month, Scott Penberthy, Director of applied Artificial Intelligence at Google gave a fascinating […]

Will PSD2 Open up New B2B Lending Opportunities?

For those that aren’t aware of the Payment Services Directive 2 (PSD2) its a new EU directive that enables a bank’s customers, both consumers and […]

Using ERP data Makes a great Case for AI Invoice Analytics

“Any sufficiently advanced technology is indistinguishable from magic. ” – Arthur C. Clarke We can credit the phrase “Garbage in, garbage out” (GIGO) to George Fuechsel, an […]

Retraction: Earlier Coverage Concerning Aztec Exchange

apology

We regret that Trade Financing Matters published two articles mentioning Aztec Exchange that featured information based on incomplete facts and analysis. These articles could have […]

SMBs Need Relationship-Based Financing and Alternative Providers Can Help

Trade Financing Matters welcomes this guest post from Calum Williamson, Managing Director/ President for Bibby Financial Services Canada More than half of small or medium-sized […]

Benchmarking FinTech Business Lending by Company Size

Why Company Size matters when it comes to adopting Alternative Finance We see various alternative finance techniques being offered to companies by size. Generally, size […]