Greensill’s Sean Hanafin, Group President, and Maex Ament, Vice-Chairman, Product & Technology, share their thoughts on the increased demand for supply chain finance and the ways in which Greensill’s data-driven risk management model, backed by multiple funding sources, is outperforming the market in meeting those needs, which in turn is driving even greater investor appetite.

 

Q: What has been Greensill’s experience of doing business and meeting customers’ needs through the pandemic?

Hanafin: Covid-19 has really battle-tested Greensill, and we’ve come through it strongly. We’re adding a blue-chip client every week, we’ve got 35% more clients today than this time last year, and we’re also doing more business with existing clients. This is because the much-needed liquidity that has needed to flow through to the economy at this critical time is right at the centre of what we do.

This uptick in business has not only been driven by Covid but also by our entry into new markets, and by new partnerships. We’ve recently been granted our licence in China and the UAE, we’ve applied and are waiting for our licence in India, and we’ve just signed a joint venture agreement in Saudi Arabia with the Public Investment Fund, one of the world’s largest sovereign wealth funds. Elsewhere, in Latin America in mid-2020 we acquired Omni, a Colombian-headquartered fintech firm.

We’ve also been upgrading our origination capability by employing a number of really good people.

 

Q: Covid-19 has accelerated digital efforts in trade to ensure that deals get done. What have been some of Greensill’s own efforts in this regard?

Hanafin: Technology has always been at the heart of what Greensill does. If you think back to the founding principles of our businesses as a supply chain finance (SCF) house, it was all about harnessing technology to deploy capital and accelerate cash flows to the SMEs at the base of supply chains – and their needs today have never been greater.

I think a number of the big banks are now starting to wake up to this. But it’s not a change of course for Greensill – we’ve built our business on technology, so we’re doubling down and doing more of the same.

It’s been interesting to see how this has played out in our loss ratios, which have been significantly lower than the market average. The reason for this is because our risk management is data-driven, which is essential in times of crisis, where there is huge volatility. The rest of the industry is entirely reliant on historical financial statements – but that’s like looking in the rear-view mirror when there’s ice on the road ahead. It gives absolutely no indication of where you’re going. Greensill’s data-driven approach allows us to identify problems and challenges and reduce those exposures. We feel really good about how we’re performing. We’ve proven the model and we’ve outperformed the market.

 

Q: What have been some of your recent standout successes?

Hanafin: We’re immensely proud of the work that we do with the NHS. This includes deploying SCF to enable pharmacists that dispense drugs to be paid early – we’re now using data analytics to predict commercial and payment patterns so that working capital funding can be provided before the drugs are ordered, allowing pharmacies to meet the prescriptions of people up and down the country.

The other part of our work with the NHS is around Earnd, our salary on-demand payment service, which allows staff to access their pay when they’ve earned it, at any point during the month and at no cost to them.

Ament: The exciting part about Earnd is that we use the same ideas and technology process framework as we do for SCF. Greensill takes a risk on the employer – in this case the NHS – and not the employee. It’s an incredibly valuable service for businesses that deploy it, and it really drives up staff satisfaction and retention rates.

 

Q: What has been Greensill’s experience as a participant in the UK government business interruption loan schemes? What kind of demand did you see, and what challenges did you face in meeting those demands?

Hanafin: We had really strong demand, no doubt about it. It’s a tremendous programme, and we were really proud to be the only fintech accredited as a lender by the UK government on the Coronavirus Large Business Interruption Loan Scheme. Meeting significant demand in very short order is what we’ve been doing for at least the last 48 months, and probably even before that. Yes, we had to move quickly for our clients, but that’s what we do all day, every day.

We were able to quickly meet funding demands because we have multiple sources of capital to deploy – we deal with over 100 different institutional and bank investors. At the end of March we managed to fund every single deal for every single client, both existing and in our pipeline. We’ve since rebuilt the total capital in all of our funds to a level which is now above what it was. Our investors have recognised that their investments into Greensill-originated assets are outperforming the wider market. What we’re seeing now is that there’s more customer demand for liquidity, coupled with more investor appetite, which is driving the business to ever greater levels.

Ament: March and April were brutal months for fintechs that rely on financing, either for their own requirements or as part of their lending business.

The diversity of the Greensill funding rails allowed us to thrive and get out of that much stronger. It really demonstrated the resilience of what Greensill has built over the years.

 

Q: Demand for SCF is rising globally: what are some of the new ways that Greensill plans to meet this increase?

Hanafin: The rise in demand for SCF is unprecedented and is a clear global trend. To take advantage of this we are growing our footprint globally so that we can service these new markets.

We have a new country chief in Brazil and we are opening new offices in China and India, and are making significant progress in MENA.

As we grow our global footprint, we are focused on growing our balance sheet and deposit base to allow us to fund in multiple geographies.

What’s more, we are investing in our technology to ensure that we have the system capacity to meet this rising demand.

These evolving investment programmes also keep us at the forefront of the exciting innovation in this space, cement our first-mover advantage and ensure we can continue to accelerate the movement of money into the real economy all over the globe at the moment it is needed most.

 

Q: SCF has traditionally been the preserve of very large corporates and their top suppliers. How is the industry adapting to meet the needs of smaller clients and longer supply chains of much smaller suppliers?

Hanafin: The big banks are actually moving further away from being able to meet the needs SMEs. Regulatory capital changes, the requirement for material technology development – these factors all conspire against the appetite, or the ability, of big banks to do this. I’m sure we will face stiff competition in the future, but it’s not going to come from the big banks.

Ament: The situation with the long tail of suppliers has deteriorated. The incumbents, the classical banks, offer SCF programmes to large corporations, but often only end up financing five, 10 or 20 suppliers. It’s not the exception, it’s the rule, and it’s gotten worse. It just doesn’t make sense for the banks: the cost of onboarding these suppliers is simply too high.

Greensill is different, firstly because we reduce those costs, and secondly because we have a long-term view on things: those suppliers will get bigger, and we may find ways to offer other services to them.

Data is a key element to being able to serve not just the large buyers but also the smaller, non-investment-grade buyers and their supply chains. Bu collecting data about the industry, the buyer and its supply chain, and putting that all together, you can do very interesting things for a much broader segment of the supply chain. The same goes for deep-tier SCF – serving the suppliers and their own suppliers – which we’ve been doing for years.