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"Banks will need to have access to a growing universe of different ledgers to serve their own clients". Looking forward to reading Earthport creating a similar hub for bitcoin blockchain ledger.

Don't say I didn't warn you... https://www.finextra.com/blogs/fullblog.aspx?blogid=8663

@Edgar Cerecerez Thank you for the heads-up. Lesson for next time: check all your URLs before posting an article!

@Paul Williams: You are right and thank you for your note. "Proof of Work" was indeed the term I should have used.

Great article and useful contribution to the SCF "cause". Thank you for sharing.

Certainly the adoption of digital exchange of data helps to prevent fraud, since visibility of transactions is increased. It all depends, of course, on the willingness of parties to open to such transparency. Most unlikely in tax-heavy regimes.

As per operational risk, that's exactly the point of SCF 2.0: The visibility acquired through the exchange of data and behavior of trading parties (e.g., was the purchase order in line with forecast? Were the goods delivered in quality, quantity, time agreed upon? Were there any disputes regarding the delivery?) enable better control of operational performance and mitigate the correspondent risk.

Physical supply chains have been always considered generators of costs, so techniques and practices to analyze data to improve operational execution and cost efficiencies have been well developed over time: total quality management, just-in-time inventory management, lean manufacturing, and kaizen are but a few of the management weapons in every supply chain manager’s arsenal. The same cannot be said for financial supply chains (FSC), of which payments represent a significant part. Until the 2008 financial crisis financial institutions mainly focused on reducing internal back office inefficiencies, giving superficial consideration to the financial flows exchanged with corporate users. On their side, corporate users did not pay overly attention because the relatively easy access to finance would offset any necessity for improvement. That left FSC processes very underdeveloped, with poor information sharing between buyers and suppliers, old-fashioned static payment and discounting terms, and largely manual pricing negotiation.

In my opinion this video nicely anticipates the next trends in how the optimization of FSC processes (starting with payments) will develop over time.

A good friend has commented this article.

The idea that SCF will need to become more broadly and deeply embedded in the Buyer’s PSC is one that seems right and inevitable. Currently the weakest link could still go without strengthening, because it is too small to justify the onboarding, but is that the right determinate from a risk perspective. Further, the anchor has limited or no visibility into the second tier buyer-supplier pair let alone the one beyond that, which is where their greatest vulnerability may lie.

Being able to assess the financial vulnerabilities of their network beyond first level suppliers should complement their PSC risk assessments across other dimensions. One could imagine anchors working with suppliers to give them the liquidity so they in turn can pass the early payments to their supplier, the anchors second tier suppliers, and so on. If the risk management is done well, it might lead to eliminating a weak partner, or finding a redundant supplier, or financially strengthening them – depending on the risk factors. So SCF become a risk mitigation tool where appropriate.

This could lead to the anchor’s SCF provider needing to onboard not just the supplier but parts of its supply chain too. I can only imagine what the legal agreements needed for pass-through funding to suppliers beneath the first tier suppliers.

One could envision integrated eInvoicing across the supplier network so that the invoices of the most distance participating supplier, would be uploaded into the supplier portal and passed up the chain, approved and purchased by the bank, anchor or other financer.

Sorry for the typo: it should read "brakes" and not "breaks"

So how many KYC registries are we going to have? Will each bank have its own preferred/ recommended registry? Does that mean that- as a corporation- I will have to register to as many registries my different banks have adhered to?

I suspect we will be soon reading about the "spaghetti mess" of the many KYC registries that will have sprouted in the course of time. The solution? Possibly a "registry of registries"... not a bright perspective in front of us.