GTR reports on the top topics discussed at the GTR North America Trade and Working Capital conference, held in New York on June 16.
Many disruptive technologies and business models were presented to delegates, causing a stir and a certain level of anxiety among traditional financiers. Glenn Kocher, former head of trade and working capital at Barclays and now managing director at LiquidX, presented a case study in which the auction platform allowed a client to save US$2.2mn on interest for its receivables finance scheme, where the interest rate fell from over 120 basis points to approximately 67 because of the auction process. While the client-centric system is good news for the corporate world, informal conversations during networking breaks revealed true reluctance on the part of certain financiers to give up their high margins.
2. Supply chain
Supply chain finance was all the rage at the conference, with a majority of presentations offering solutions to improve its efficiency. However, the biggest issue according to most speakers is the onboarding of suppliers, which is costly and time-consuming due to KYC regulations. Traditional financiers admitted that as the majority of revenue comes from multinationals’ first layer of (mostly investment-grade) suppliers, it wasn’t really worth their while to try and onboard smaller players. Meanwhile, alternative financiers such as GT Nexus, Taulia and Greensill Capital explained how technology could help to solve the onboarding headache.
As Fluent Network’s head of vision and decision Lamar Wilson put it, “blockchain has become a bit like hot sauce: people think they can sprinkle it on any problem to solve it”. Indeed, distributed ledgers and their applications in trade and working capital finance were much discussed at the event, with various providers presenting their platforms to the audience. Fluent, for example, aims to shape the basic infrastructure on which banks can build proprietary applications for their clients, becoming to trade finance what iOS is to phone apps.
While not included in the official programme, regulation transpired as a concern for delegates, who raised the issue throughout the day. One delegate posed the question of the various regulatory regimes involved in cross-border transactions, and how platforms like LiquidX and GT Nexus handle that complexity. Others asked about fintech firms’ KYC processes and how receivables should be treated in paperless transactions. Though speakers provided some elements of feedback, it seems that uncertainty is still prevalent in this nascent sector.
From the receivables finance panel held at the event, it appeared that transparency between buyers and suppliers involved in receivables financing programmes could be tricky. William Evans, Emea product champion for supply chain finance and Americas head of transaction banking at ANZ, pointed out that some sellers were nervous about disclosing their involvement in such programmes, as some buyers could use it as leverage to negotiate on pricing.