Supply chain finance roundtable: A new stage of evolution

In April, GTR assembled senior figures from across the US and Europe’s supply chain finance sector to discuss the impact of geopolitical uncertainty on product offering and demand, how distribution and investment in working capital assets are developing, and how technology is expected to transform the sector.

Roundtable participants

• Ali Ansari, chief executive officer, Nifina
• John Basquill, senior reporter, GTR (chair)
• Maurice Benisty, chief revenue officer, FIS Supply Chain Finance
• Heather Crowley, global head of trade and working capital product, JP Morgan
• Carlos Eraso, global head of supply chain finance, Santander CIB
• Peddy Hashemi, managing director and global head of customer success, SAP Taulia
• Pauline Kontos, global head of working capital advisory, Citi
• Duncan Lodge, global head of supply chain finance and head of trade finance for global payments solutions Emea, Bank of America

At this discussion, hosted virtually to include representatives from the US and European markets, senior figures from the banking, non-bank and technology sectors shared their views on how supply chain finance is evolving.

Ongoing geopolitical uncertainty has had a profound effect on companies’ working capital management, pushing demand to historically underserved areas of the market while driving interest in traditionally niche products, such as inventory finance, speakers said.

At the same time, participants addressed the drive to attract wider investment and deepen liquidity pools in the sector, and the role technological developments – not least AI – are expected to play in supporting transformation of the business.

Geopolitical uncertainty

Whether due to the Covid-19 pandemic, the war in Ukraine, the tariff regime in the US or the conflict in the Middle East, companies have faced what JP Morgan’s Heather Crowley described as “rolling supply chain shocks” over the last six years. Against that backdrop, supply chain finance has developed into a crucial tool for ensuring companies’ operations remain resilient.

“Large corporates can generally manage through these events, but what about their suppliers, especially tier-two or tier-three suppliers? How are they going to get through the next one?” Crowley said.

“We certainly learned with Covid, and then with subsequent events, that if you don’t get that widget it can stop the entire assembly line.”

Specific pressures vary by market. For example, Citi’s Pauline Kontos said a survey of the bank’s clients carried out early last year found an average of 6.3% of companies’ cash was “tied up in tariff funding, increasing costs and putting pressure on working capital”. The impact ranged from 6.9% for Apac corporates to 5.1% for North American corporates on average.

On the other hand, in markets reliant on the Strait of Hormuz, issues stem from being unable to move physical goods in the first place.

“Companies in the Middle East were no longer able to ship their products, and that goes down into their supply chains, and means revenue is not coming in,” Kontos said.

In both cases, supply chain finance takes on greater strategic importance, not just as a tool for managing working capital but to ensure supply chains can continue functioning during periods of upheaval.

“With each event we have, we can see working capital solutions coming in to ensure supply chain resilience, whether it’s payables, cash, receivables or inventory,” Crowley said. “When you think about the entire supply chain, that’s where these solutions come into play.”

Peddy Hashemi of SAP Taulia characterised this trend as “a shift from metric optimisation more to resilience”, as companies rethink liquidity strategies.

“This is repositioning supply chain finance as a more strategic tool. Procurement’s priority is now supply continuity, with suppliers increasingly pushing for shorter payment terms due to tighter liquidity positions. As a result, the focus has shifted from extending payment terms to protecting existing terms.”

Shifting demand

Buyer-led or payables finance is a mature segment of the supply chain finance market, with widespread adoption among larger corporates in Europe and the US. As a result, shifts in demand have been different in the payables market compared to the receivables segment.

For payables, geopolitical uncertainty and supply disruption have helped push additional interest in the product, Kontos said. Larger companies that did not previously have programmes in place “are seeing the value of it now, particularly to help their suppliers’ resilience”.

At the same time, programmes are being extended beyond larger buyers. Santander CIB’s Carlos Eraso said the bank is seeing growth “particularly within the mid-market, where demand is clearly increasing”.

The product itself is also continuing to evolve, with Bank of America’s Duncan Lodge saying there are now more tools in the toolbox than ever before to support payables optimisation.

“I know we’ve talked about tail spend for a long time, but I don’t think it was ever truly unlocked. Quite recently we have seen optimisation of onboarding now benefiting smaller suppliers and enabling them to access programmes that they would have previously been ineligible for,” he said.

“Alongside that, we have seen the development of new solutions such as card-to-account products, where buyers use a corporate card to pay suppliers directly without the supplier requiring a card acquirer.

“We have also seen corporate payment undertaking models, where early payments made to suppliers extinguish the receivables which removes the need for suppliers to sign receivables purchase agreements and further accelerates onboarding.”

Maurice Benisty of FIS Supply Chain Finance, formerly Demica, which carries out an annual benchmark survey assessing the views of banks and investors, said the growth of the payables finance market remains outpaced by receivables finance. This is partly because of the speed programmes can be put in place, he said.

“More generally, there is more funding going into the sector, both to invest in technology and to deploy capital on receivables,” he said. “The demand is certainly more visible on the receivables side.”

Kontos agreed receivables finance “is definitely growing”, albeit from a lower base than payables.

“Companies that did not have appetite for receivables, or even that had internal policies which didn’t allow for it, are changing that mindset now to help with working capital,” she said. “At the same time, many buyers are asking for longer payment terms, so they need a way to mitigate that risk.”

Lodge added that financing portfolios of receivables is growing in popularity as a working capital tool, which “addresses an area that has often been challenging to unlock”.

“The ability to address that full portfolio is very compelling in times of uncertainty and stress, and we are seeing new solutions coming to the market to address this,” he said.

The rise of inventory

Since the pandemic, a shift from just-in-time to just-in-case supply chain management has been a common talking point.

Diversifying sources of supply can help build resilience, but is not necessarily an option for every company, so many are resorting to holding greater quantities of stock to keep themselves insulated from potential shocks. As Crowley said, holding minimal inventory “is not really as in vogue as it used to be”.

That creates an issue, however. “Stockpiling means all of this inventory is now trapped working capital,” she said, meaning interest in inventory finance – which has historically lagged behind other types of working capital finance – is growing.

“It’s a much more complex solution compared with other trade finance products,” Crowley said. “Unlike payables or receivables, there really isn’t a standard, commoditised form of inventory finance. It has to be customised, and that means it hasn’t been as prevalent as other solutions, but we are certainly working to deliver these kinds of options to our clients.”

Inventory finance is a “complex solution”, Lodge added. “It can take a lot of time to set up, and a lot of legal expense. We don’t see it at the same volume or scale as supply chain finance more broadly. But when it’s implemented successfully, it can bring very significant benefits to corporates.”

Lodge highlighted two trends in the inventory finance market. First, the expansion of artificial intelligence and the build-out of data centre infrastructure means there are “just huge amounts of inventory that will need to be financed”, he said. “We expect to see more deals this year than last year.”

Second, Lodge said some clients are turning to “lighter-touch” inventory solutions, which can be put in place more quickly and with less cost or complexity. “They don’t achieve the full benefit of the more comprehensive inventory finance solutions, but they can certainly help unlock payables optimisation for clients.”

Liquidity, distribution and investment

For several years, the trade and working capital finance industry has been pushing for distribution of assets to a wider range of investors, diversifying sources of capital beyond the traditional banking sector.

“Obviously, the banks will always be there for the trade finance assets with short tenors and strong credit names in terms of the obligors,” said SAP Taulia’s Hashemi. “But we’re seeing an increase in non-bank activity, and the sub-investment grade names are getting a lot more traction on the receivables side.”

For some participants, the private credit market presents a major opportunity to broaden the investor base, bringing asset managers, insurance companies and fintechs into the ecosystem.

There have been concerns in the sector that the high-profile failure of First Brands – which has been accused of forging documents to obtain working capital finance, leaving private creditor investors collectively facing billions in losses – could have a chilling effect.

“There is appetite from private credit to come into this market, but there are different stories playing out. It’s a mixed bag,” said Benisty. “Some players have been negatively impacted by the likes of First Brands, because their underwriting standards or risk concentrations weren’t what they should have been.

“But on the other side, you have players coming into the market with strong risk management and underwriting standards. We’re seeing this because they want a third party to deliver the servicer reports rather than rely on the customer. The result is they’re growing their capital under management.”

For Santander CIB’s Eraso, the involvement of private credit in the working capital finance market requires care.

“Overall, it broadens liquidity sources,” he said. “At the same time, maintaining stability and consistency of funding remains critical. Because of that, we try to place a strong emphasis on relationship-driven distribution strategies and close collaboration with clients and funding partners when structuring syndication approaches.”

JP Morgan’s Crowley suggested more investor education could be required to resolve a “bottleneck” in attracting additional investment, but that the opportunity for the sector at large is a positive one.

“Some people are still getting up to speed on these assets, and recent industry events caused a knee-jerk reaction. But broadening the funder base is a compelling proposition in today’s environment; the technology has made it more accessible to all, with platforms packaging assets together in a way that investors can evaluate,” she said.

“Now, people want to do maybe a triple click rather than a double click, in terms of understanding what these assets really are. For us as an industry, we have an opportunity to make it more transparent, more simple, and unlock the next wave of distribution.”

However, Nifina’s Ansari was more sceptical about the benefits of this investor class.

“I don’t think private credit is the answer,” he said. “My personal experience is that it’s tougher for them to underwrite than it is for a traditional bank.”

For Ansari, the issue is not depth of liquidity but its breadth within the banking sector. “The liquidity pool has always been there, and it’s deep, but if you look at the second-tier banks, there are still a large number that don’t participate in programmes,” he said.

“Some of that is an education issue, some of it is an outreach issue, but speaking frankly, I would put it on the shoulders of the originators to draw more liquidity from the bank market.”

Tokenisation and AI

Developments in technology continue to hold great promise for working capital financing. Tools that improve efficiency and lower costs make it easier to deploy programmes for smaller companies, and greater transparency can help mitigate risk and attract investment.

For Lodge, tokenisation represents a “really exciting” opportunity to unlock further investor appetite in trade, particularly for receivables.

“If you tokenise an invoice, you can then append metadata to that invoice,” he said. “From that, you could see whether it has been confirmed, it’s insured, it’s on policy, and even the average dilutions between that buyer-seller pairing. The more information you can append to that invoice, and the more standardised that becomes, the more you will attract investors and improve liquidity.”

However, for Ansari, tokenisation “absolutely works in theory” but faces obstacles in practice. “There is a long journey here around education,” he said. “And because there is not much focus on blockchain within these institutions, it’s going to be a hard sell.”

Other established technologies, such as robotic process automation and machine learning, are making “incremental, marginal progress”, Ansari said. “The game changers are, as you would expect, the large language models and agentic AI processes.”

Those tools, which exist within the artificial intelligence world, should help institutions overcome barriers to scale. Smaller supply chain finance programmes that would previously have been costly and complex to deploy can be developed far more easily, he said.

“This is also a journey,” he added. “There are concerns about AI hallucinations and data leakage, and although the models that are out there are superb, large companies are not going to give away their internal models to the likes of Claude or Azure to go and play with. It’s an evolving situation, but I’m very excited to be playing a part in it.”

Another issue on the borrower side is an “adoption gap”, whereby larger corporates are likely to be in a better position to capitalise on AI’s potential, Kontos pointed out.

“Using AI should unlock a lot of trapped liquidity and really help scale the solutions for middle market and SME segments,” she said. “But smaller companies will have to lean on their partners for the investment, and there are challenges around data readiness, in terms of the data they have available on their existing platforms. That could hamper their ability to catch up with the corporates.”

Opportunities ahead

Participants were upbeat about the next stage of growth for supply chain finance, with ongoing macroeconomic uncertainty likely to act as a driver of demand. Benisty highlighted the structurally higher interest rate environment as an example.

“Stress around interest rates is going to create uncertainty, and uncertainty is often very good for receivables finance in that mid-market segment,” he said.

“We are seeing that feed-through at the moment with the corporates we deal with, and with the banks, both of which are looking at how they can help suppliers access increased liquidity. My summary would be that this should increase the industry growth rate and prove to be a net positive through uncertain times.”

For Eraso at Santander, the need for companies to manage their working capital position presents “a significant growth opportunity in the mid-market segment, where penetration remains relatively low”.

“That is happening alongside expansion beyond traditional payables into other areas, including inventory finance and broader solutions across the end-to-end procurement cycle. Then, greater integration across digital ecosystems and customers’ native platforms will be a key enabler for accelerating adoption of these kinds of solutions,” he said.

“In terms of challenges, there is inter-regulatory and accounting complexity, which can limit growth in some cases, especially in this uncertain macroeconomic environment. Overall, I believe the industry is entering a very important phase in the evolution of supply chain finance, driven by digitalisation, broader investor participation and increasing client demand for resilient working capital solutions.”

As much as regulatory reforms can add complexity to supply chain offerings, Hashemi suggested they can also present an opportunity to expand their reach.

“One thing we will see over the next few years, certainly in Europe and Asia Pacific, is the mass rollout of electronic invoicing on the back of government initiatives aimed at enhancing compliance and reducing fraud – whether that’s business-to-business or business-to-government,” he said.

For buyers with payables financing programmes in place, that will require compliance from a legal and tax perspective.

“On the positive side, electronic invoicing will drastically improve invoice processing times and boost access to payables financing,” Hashemi added. “E-invoicing could reduce processing times, and the adoption of supply chain finance and dynamic discounting will increase.”

Ansari pointed to the transformative role AI can play in companies having better control of their data and a deeper understanding of the trends it shows.

“From there, what I think will eventually evolve is a reversal of the supply-demand arrangement,” he said. “Companies will be in a position to tell their financing providers exactly what solution they expect to see. Then, through agentic processes, those companies will be able to integrate that solution across their trading partners.”