Supply chain finance (SCF) has continued to exhibit strong growth in the last two years, according to latest research from Demica, which reveals average annual SCF growth rates between 30% and 40% at major international banks.
The SCF market - in which transaction banks provide top corporates with short-term financing to pay suppliers - is expected to continue to expand strongly to the end of the decade, although the pace of growth will moderate to 20-30% per annum by 2015, and 10% per annum by 2020.
The research - conducted amongst the European top 25 banks, plus a qualitative sample of international banks from Asia, Australasia, Africa and the United States and 14 multi-national corporations - picks out the growth of e-invoicing systems as a significant market accelerator in the near future.
Financiers believe that the highest growth of SCF currently originates from the US and Western Europe, in particular the UK and Germany. Eastern Europe, India and China are considered the top three regions with future SCF market potential.
Almost 90% of the bank respondents regard SCF as a need-to-have financial product for corporate buyers, with more than three quarters of them considering it an added-value product. In the medium term, bank financiers expect domestic SCF programmes to become an absolute "must have" for corporates, while intensified competition will standardise and commoditise the domestic SCF service offering.
Bank respondents also see cross-border SCF programmes further establishing themselves as an increasingly crucial facility, but indicate that their "added-value" status will be retained by virtue of such schemes' greater complexity.
Phillip Kerle, chief executive officer of Demica, comments, "The upward growth trajectory of SCF witnessed by global banks demonstrates the growing importance of this facility in the trade finance armoury. In addition to the working capital benefits, nowadays businesses are also placing greater emphasis on operational efficiencies and cost reduction. The increased transparency and visibility in payment processes facilitated by SCF will therefore prove to be a particularly valuable asset for suppliers and corporates alike."