Supply chain finance experts from banks, tech firms and service providers warned that technology alone won’t make your supply chain finance programme a success and that closer collaboration between all key parties is key.
Speaking at the SCF Forum in Amsterdam, panellists told delegates that the current market is no longer characterised by a battle between traditional banks and newly-emerging fintechs for market share. It is now more about seeing how each player can support the other. “Our view is that this is all about collaboration. We have invested in partnerships with fintechs. The closer we are to fintechs, the more beneficial it will be,” said Fernando Diaz Hernando, head of global SCF and payments at BBVA.
Tracy Kellaher, director, banking alliances, at Tradeshift, a cloud-based platform for supply chain payments, said that banks are seen as partners in their business. “We have had investment from banks. We have from the beginning when we started Tradeshift,” she said.
Markus Schiffers, managing director, head of origination, Europe, at SCF service provider Orbian said that the fintech-bank relationship has changed significantly: “It is no longer fintechs against the banks. It is really about working together,” he said.
Colin Sharp, senior vice-president, EMEA at fintech C2FO, told Forum delegates that clients often want to have a choice about their solution providers. “Sometimes those customers want solutions that are entirely independent and sometimes they want to be able to have a relationship with a bank. So, we have very close partnerships with banks. What we do helps the bank make a solution that meets the requirements of the client.”
In particular, banks can act as a “filter” for the market, helping corporates navigate the evolving technology sector, he said. “There are so many stories about machine learning, robotics, blockchain, there are so many of these companies, so how do you – as a corporate – filter out the good ideas? The ones that are going to last. The banking partners are filtering the market. They are looking at which ones are the better ones, which ones are going to survive, which ones add value to my client,” he said.
Panellists noted that banks’ often more conservative nature can be useful in a market space where regulatory frameworks surrounding fintech solutions are still being formulated and tested. Matt Ford, regional vice-president for EMEA and APAC at PrimeRevenue, explained how banks can act as a brake on some of the ambitions of the fintech sector, ensuring that proposed solutions don’t have the potential to contravene regulations.
“Banks are very protective and will not build solutions that take us into the grey. We work with largest corporations and we don’t bring things to them which might be in the [regulatory] grey area. I certainly see Fintechs making amazing claims – but maybe they can’t. The bank won’t do that as they are in a long-term relationship [with the client],” he said.
Sharp noted that Citi – a bank with which the tech firm recently collaborated on an SCF-related projects – did a “huge amount of due diligence” on what would be the best solution and what fintech firm to work with. “A level of trust was already established due to the level of diligence,” he said.
This trust was key, said Pravaiz Dalal, head of supply chain finance for treasury and trade solutions, EMEA, at Citi. “Execution is the crux of the success. You need to trust in people who are delivering the solution. Supply chain finance or dynamic discounting is an easy-to-sell the concept. It can be sold in one second to the CFO. It is all about execution.”
Listening to the client’s needs is part of the process, said Schiffer. It is not just about pushing a product on them. “You have to follow the path of the buyer. Does it need to cover a different country or smaller suppliers? There is not a ‘one size fits all’. What if someone decides it doesn’t want single bank provider? You have to listen and find a solution,” he said.
Kellaher urged that fintechs and banks need to approach prospective clients together to ensure “clarity” in their proposition. “A lot of the time we are embedded with the sales team, so we are going in together. What is requires is communication and clarity of conversation. We are trying to get the same message out. It is incumbent for bank and provider to work together to articulate the proposition at the same time”, she said.
While the SCF market continues to see great leaps forward in the use of technology, Sharp asserts human interactions between providers, banks and potential clients will be vital to the success of your SCF proposition.
“Technology alone will not make this a successful programme, particularly when you are scaling this out to large volumes of suppliers. Think about what you will do. You will connect to their ERP system and extract approved invoices and take as much as that contact data as you can give us. That contact data – even if it’s the best we’ve seen –might be out of date.
“If we just sent emails or just digital communication – they will go to the wrong people. If you do get to the right person [with email], they think it is spam. You need people out there in the field in local-time zones and local language to call suppliers and to be a buddy or partner to them. That takes a lot of investment. Your programme will fail if you don’t do this.”