26 November 2014

Enrico Camerinelli

enrico camerinelli - Aite Group

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Financial Supply Chain

In the world of international trade, the process of exchanging payments, information and documents between buyers, sellers, banks, and other involved parties is becoming increasingly important for financial institutions. This community aims at presenting views and innovative ideas related to this financial supply chain space.

2013: The year of execution for Supply Chain Finance

15 December 2012  |  4272 views  |  0

In 2013 banks will concentrate on producing results after the period of evaluation and investments in areas like SCF, Regulatory compliance, SEPA, integration of cash and trade.

Banks will work to empower their corporate counterparty (e.g., the treasurer) while creating conditions to generate volumes for revenue growth.

Transaction banking must give way to relationship banking, but conditions do not allow this paradigm shift and banks will still be caught in the middle between the willingness to become more customer-centric and the practical impossibility to change on the fly organization, processes and technology infrastructure.

Banks will start wondering whether it is still worth for them to keep doing business in relatively new areas for corporations like Supply Chain Finance (SCF). The credit crunch and consequent economic crisis made business perspectives look good to banks. Large and small corporations were (and still are) all in demand for liquidity and improved working capital, so the provision of advanced cash in the form of approved payables or receivables finance appeared as a “no brainer” to most banks. Yet, bank-driven supply chain finance programs take longer than expected to run and the sales cycles take longer time than expected making costs rise and results lag.

Apparently corporate executives are suspicious of bank-driven SCF programs for several reasons:

  • The administrative “bureaucracy” around the setup of a SCF program is still significant
  • Not all suppliers are invited to the anchor buyer’s SCF program
  • Banks require frequent credit checks which distract from business and turn SCF programs into an administrative nightmare
  • Companies experience internal barriers between departments and lack of cooperation and common vision hinder the positive outcome of any program
  • Bank sales reps usually address their proposition to treasurers and decision makers from the finance department. Strong “influencers” such as procurement, logistics, and IT are left out of the process—at least in the initial phases—exacerbating the already difficult task of getting the company onboard
  • IT solution vendors do not enjoy better results as the majority of their business relies on financial institutions to act as “anchor points” for SCF programs

Bottom line: Expect banks to start looking for clear roadmaps for implementation to minimize costs and start reaping the benefits of recent investments. IT solution vendors will soon begin to deploy Readiness-Maturity models that measure the readiness of a company to embark in a SCF program and the maturity of a bank’s organization to profitably and successfully deliver the program. Corporate users will privilege banks that approach them with a clearly articulated SCF program roadmap models. Banks will rely on IT solution vendors and business process outsourcing service providers to build such models.

TagsWholesale bankingTransaction banking

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name

enrico camerinelli

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sr. analyst

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Aite Group

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2009

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Boston

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Senior Analyst for Corporate Banking, based in Europe. Current research focuses on Global Transac...

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