50 Years Facilitating Open Account - Trade Finance

Development of the Supply Chain Finance project

Tuesday 6 June 2017

It has been only 7 months since we last met in Cape Town for the FCI Annual Meeting, where we discussed the progress of the Supply Chain Finance Committee in finding the best partner for FCI in the field of approved payables finance. A lot has happened since then, and not just at the FCI SCF Committee, but in the Industry as a whole with new players entering the market, and other solution providers completely upgrading their offering to better meet the demands of the market.


Given that the market is moving rapidly at the moment, it is good to learn about the research done by the Supply Chain Finance Community, which reveals that within Europe, 65% of companies with a revenue over EUR 1 billion are now actively offering Supply Chain Finance. However, in that same research, it was found that only 10% of companies with a revenue below 1 billion euros, offer Supply Chain Finance to their suppliers. The focus of SCF solution providers/funders has long been in the large corporate space, mainly for the same reasons as to why large corporates focus their programs on their largest suppliers first: on-boarding effort per entity is roughly the same, but with larger volumes per entity the benefits of the program scale easy.


What this means however, is that the SMEs and mid-corporate clients are currently operating in a potential finance vacuum. They are being served through existing products and services, but have not yet been able to benefit from the developments in Supply Chain Finance and corresponding potential benefits on the lower cost aspect of funding. This is the driving force behind the project at FCI as we are strong believers that the extensive network of FCI should be able to offer adequate solutions to these (potential) clients at competitive rates. And it is not just the interest rate arbitrage driving the developments of Supply Chain Finance. For corporates, it also allows to streamline their P2P process, to reduce the number of inquiries from their suppliers, to allow for better cash forecasting by their suppliers and ultimately leading to a stronger and more resilient supply chain guaranteeing delivery reliability within that supply chain.


The work done by the Supply Chain Finance Committee in this respect is really a first step to capture the market potential for each individual FCI member. Selecting a platform that allows for 3-corner and cross border 4-corner solutions is not the same as implementing and consequently selling it in the global market. During the Annual Meeting in Lima, our progress with the selection of a preferred SCF solution provider will be shared with the members and additional information on the functionality will be provided. We are convinced that the project will get its approval from the Council, and hence the next step would be to create a pilot group of members that will implement the FCI SCF platform before the end of the year. It is of crucial importance though, that the individual FCI members (you!) start thinking about their own offerings and business case now, as this will be an important topic during the group discussions on Monday 12 June.


We are looking forward to having in-depth discussions with you and would encourage you to engage with us before, during, and after the Annual Meeting in Lima, sharing your questions, concerns, challenges and hopefully also ideas and best practices! The ideal place to come together and share your feedback is on the closed (meaning FCI members only) LinkedIn group called “FCI Supply Chain Finance Project”, but you can also reach out to the individual members of the SCF Committee.