By leveraging the shipping industry’s rich trade data, technology-based alternative financing models can unlock the true potential of supply chain finance. Dmitri Kouchnirenko, founding partner at Incomlend, explores the benefits of fintech-shipper partnerships.


In October 2019, we announced the launch of Shipfin Trade Finance, the solution Incomlend developed exclusively for shipping and logistics industry leader CMA CGM. Through the platform, CMA CGM’s clients are able to purchase trade finance services such as factoring or supply chain finance (SCF), with buyers able to extend credit terms to up to 120 days.

Buyers and exporters register digitally and undergo an online due diligence process, after which they can submit finance applications and monitor finance activity through dynamic dashboards, all the while managing their cash operations. On its end, CMA CGM is able to process invoices through Incomlend’s risk management framework. And for maximal funding flexibility, Shipfin Trade Finance leverages Incomlend’s unique marketplace funding model and global funding pool capabilities. The service is available on the CMA CGM Group’s subsidiaries platforms which are CMA CGM, ANL, APL and CNC. It is currently open to customers based in India, Dubai, Singapore, China – Hong Kong SAR, Malaysia, Indonesia and the Philippines. It is expected to be gradually deployed to other countries and regions.


An efficient strategy for a holistic approach of clients’ needs

It makes perfect sense for a large global shipping firm to set up trade finance services for its customers, leveraging on its logistical knowledge and opening new funding opportunities. With the current oversupply in the shipping sector, competition is up and prices are under pressure, pushing players to look for value-adding solutions. Trade finance is a very natural extension to shippers’ core business, since they have full visibility on their clients’ trade flows through managing their logistics: they know who buys, who sells and how often, they have data on loading and offloading, they control bills of lading and can track containers. Combining trade finance and operations in the same one-stop-shop is a powerful strategy to create an integrated value proposition for trading companies.

In 2017, the global container shipping industry generated transport revenues of US$166bn, managing the flows of 207 million twenty-foot equivalent units (teu) of ocean containers, according to maritime research firm Drewry. This represents around 1.26 billion freight invoices. CMA CGM alone is present in 160 countries through its network of 755 offices, and its 506 vessels serve more than 420 ports on five continents. This kind of global reach, matched with the right fintech capabilities, can work wonders in reducing the US$1.5tn trade finance gap worldwide.

While shipping firms benefit from an incredible wealth of data to help make lending decisions, it’s important they find the right funding partner. Of course, banks represent powerful allies when serving large corporate blue-chip customers, usually representing tier one and tier two companies in global supply chains. When it comes to companies of more medium to small size, sources of funding become scarcer as the higher granularity of risk makes them less cost-efficient for big lenders to process. Hence, new alternative sources of funding are making their way to extend the reach beyond tier two players in the supply chain. Considering that 74% of rejected trade finance requests worldwide fall on SMEs, alternative finance solutions have a major role to play in plugging the funding gap, as they are supported by specialised capability in managing the trade operational risk and benefit from process automation through digitisation.


Focusing on smaller traders

On the other hand, Incomlend was born of a desire to increase financial inclusion for SMEs around the world. Our target is, and has always been, a customer base that goes far beyond investment-grade companies. Our online invoice trading platform works as a marketplace, connecting exporters, importers and private funders across the globe, so that every layer of the supply chain can receive the financing they need when they need it. We see this as the only way to minimise supply chain disruptions and improve the long-term trade environment.

Compared to many other players in the invoice financing sector, Incomlend has the ability to manage multi-country on-boarding and funding, and to conduct cross-border transactions in multiple currencies, giving it the capacity needed to serve global supply chains and partner with a global shipper such as CMA CGM.

For all these reasons, when CMA CGM decided to support its customers’ business through tailored financing solutions, it found that Incomlend was very much aligned with what it was looking for in terms of risk management and processes. About a year ago, we started collaborating on Shipfin Trade Finance and today, CMA CGM relies on Incomlend not only as a technology partner, but also as its provider of funding for the clients. Incomlend’s know-how on risk management and client on-boarding does the heavy lifting for due diligence, and in turn, the private funders on our platform get access to CMA CGM’s trustworthy client network, backed by historical trade data. It’s the epitome of a win-win relationship.


Finding flexibility in the process

Even with aligned objectives, the complexity of delivering a simple technological solution for a global clientele spread around various trade corridors, distribution networks and sectors was a challenging task. There were a number of different layers of decision-making, legacy systems and paperwork to go through. It took some time for Incomlend and CMA CGM to work out and perfect the target solutions, interaction structures and client journeys. And on the technological side, Incomlend had to develop the on-boarding and trading modules that took on CMA CGM’s specifications, and deliver a platform adapted to its processes and broad network coverage.

We managed this whole process in just one year, and today many clients are already on-boarding and trading on the platform. When it comes to integrating business processes, the nimbleness of a fintech firm like Incomlend is hard to beat. Compared to large incumbent financiers, the fintech community is much better positioned to adapt to complex requirements and logistics of shipping firms, and to implement tech-based funding solutions within a short time frame. This is why we believe the type of partnership formed between Incomlend and CMA CGM is a landmark framework to increase global financial inclusion, and we hope that our experience can serve as a blueprint for future collaborations.

Small and medium-sized companies are a widely underserved trade finance market: an estimated 200 million of them have little to no access to credit. Between 2013 and 2016, the overall alternative finance sector grew by no less than 25 times, mainly to targeting the SME market and aiming to fill the gap left by banks. This is very positive, but serving the needs of this multilayered market is extremely challenging, and collaboration with large and experienced companies in the trade space is an additional way to overcome those challenges. Making a significant dent in the trade finance gap will take some time, but shipping companies are arguably in the best position to understand and manage those needs – as long as they find an alternative funder with the risk management expertise, funding capability and global reach required for the task.

At Incomlend, we expect to facilitate the financing of US$1bn of invoices by the end of 2020. We know the future of supply chain finance will be made of more alternative, granular financing that leverages technology and data to reach even the last mile in the supply chain. And we’re ready to take on the challenge.