Technology forges SCF momentum
The ideals of supply chain finance (SCF) revolve around optimising working capital, reducing risk and increasing visibility. To date no single industry player is in a position to provide all those functions from one box. Enter the TSU and various other supply chain-related initiatives, writes Justin Pugsley.
Supply chain finance (SCF) is very much a game of partnership and collaboration as it relies on combining a range of skills and technologies. It is about co-operation between specialist technology providers with the providers and arrangers of finance.
Meanwhile, applying SCF is being given a higher priority with corporates under increasing pressure from shareholders to deliver high returns.
The last few years have seen plenty of innovation and a deeper understanding of SCF. In view of this, it is fitting that Swift chose ‘gaining momentum’ as this year’s theme for Sibos.
Also, 2007 marks a key milestone in SCF.
On April 26, JPMorgan Chase and BNP Paribas announced the first live inter-bank end-to-end transaction through Swift’s Trade Services Utility (TSU).
Indeed, this single piece of infrastructure has been a key focus for technological innovation among banks and technology providers.
In a nutshell, TSU will enable banks to provide more tailored solutions around open account transactions, which now account for the majority of international trade.
In time, as TSU becomes more widely adopted, it should be accompanied by many new SCF-related products.
In the meantime, convergence has been one of the big themes surrounding banking products. For example, Standard Chartered launched its Straight2Bank integrated platform earlier this year.
In essence it allows users to address many of their trade finance needs from a single platform. From Straight2Bank, users can prepare supporting documentation, manage cash and even hedge currency positions. These various functions used to be carried out from different platforms.
The latest platform from Standard Chartered and new ones from other banks seek to address an all too frequent criticism from coporates. That is that they have to log into three or four separate platforms – often from the same bank – to carry out their transactions. It is both costly and time consuming.
Not to be outdone, Deutsche Bank has been doing some convergence of its own.
It now has placed cash and trade solutions on one integrated platform. This is to give treasurers and procurement officers better visibility of their financial supply chains.
According to Deutsche, the greater functionality and transparency will not only reduce risk and give greater control over cashflow, but even throws open the possibility of new financing models.
For example, the platform will make it easier to conduct event driven financing such as on the presentation of invoices or purchase orders.
Specialists make ground
In the meantime, specialist providers such as EZD Global, Demica, SCF Capital and PrimeRevenue continue to make headway.
Some offer technology platforms for SCF. Others focus on specialist finance solutions enabled by proprietary technology to give them a unique offering. But all are building out new business models exclusively focused around SCF and cash management.
Specialist SCF platform provider PrimeRevenue recently announced that it is to act as exclusive technology and services provider for Morgan Stanley’s trade receivable finance solution (TReFS). Ellen Brunsberg, the bank’s European head of securitised products group says: “Morgan Stanley is witnessing strong demand for SCF solutions? Global 2000 companies increasingly have global supply chains and are seeking to reduce costs.”
Indeed, PrimeRevenue has been very active signing numerous deals with leading retailers and manufacturers in the US and abroad and continues to expand rapidly.
SCF Capital has been ploughing on with its ‘industry procurement utility” approach. The boutique investment bank is seeking to harness the strength of the capital markets along with supply chain participants, financial providers and logistics firms to provide lower cost funding. It is applying its expertise from industries from the high-tech sector and banking to develop an automated procure-to-pay platform.
Indeed, its founders come from those backgrounds as is often common with the new bread of SCF players.
During the middle of 2007 a number of technology providers announced contract wins. Among them was Misys Banking Systems, which made further progress with
Its treasury solution, Optics Plus. One of the latest adopters is Surinam’s De Surinaamsche Bank.
TradeCard, the provider of global trade solutions for financial and physical supply chain automation, managed to bring on board Brooks Brothers. The US retailer will use TradeCard’s solution to fully automate its transactions with its global suppliers from purchase order through to payment.
The solution will greatly reduce paperwork and manual processes, which in turn will improve efficiency and lower error rates.
Earlier in the year, trade finance solutions provider Surecomp launched allNETT, a Java-enabled internet-based trade finance customer front-end solution for banks’ corporate customers.
The product is a 24/7, multi-customer, multi-entry solution where trade finance transactions can be initiated and where enquires and reports can be generated. Surecomp’s solution requires no software installation for the corporate customer, just a browser and an internet connection to access it.
To give allNETT extra flexibility, Surecomp has adopted a service-orientated architecture.
It has been recognised for sometime now that ease of use and minimal implementation disruption will prove key to the wide adoption of SCF products. This has spurred widespread development of products that are web browser driven and that can operate with legacy IT systems.
Around the same time, trade finance solutions vendor China Systems launched Customer Enterprise with the Bank of Western Australia taking up the solution. The product is browser-based and B2Bb focused.
The Java-enabled solution enables a bank’s customers to access trade services through the web.
Meanwhile, Krung Thai Bank bought a licence for China Trade’s Eximbills Enterprise solution. The product is designed for processing trade transactions.
Without a doubt SCF is gaining greater momentum as this year’s various product releases and innovations demonstrate. No doubt this year’s Sibos will see plenty of exciting new product launches along with many new deals signed.