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Corporates must look to fintechs for capital in the supply chain

In the past few years, an entire ecosystem of Cloud-based services has grown up around facilitating supply chain transactions and helping buyers and suppliers achieve healthier balance sheets.

Some of these services come from banks but the majority are offered by financial technology companies (fintechs), which are now transforming the global supply chain, according to an article in Harvard Business Review (HBR).

Traditional supply chain finance is supplied by a bank intermediary, which bridges the financing gap and facilitates transactions between buyers and suppliers, helping both parties to improve their working capital and free up cash.

Technology achieving greater supply chain efficiency

Fintechs are now getting in on the act and are using technology to achieve even greater supply chain efficiencies, for example with Cloud-based software platforms that provide integrated procure-to-pay services, including both purchasing management and accounts payable functionality. According to HBR, “These integrated systems enable buying firms to greatly reduce the burden of administering these functions because they close the loop between procurement and accounts payable and provide a structure that streamlines these processes.”

Reducing payment terms to two days?

Suppliers using such platforms can submit invoices, which the buying firm approves online, leading to a sequence of processes, including the ability to choose the date on which the payment is received. According to the authors of the HBR article, using such fintech platforms can reduce the payment term to as little as two days, compared to the industry norms of 60, 90 or 120 days. Such platforms also facilitate the process of offering early-payment discounts.

Orbian, Prime Revenue, C2FO, Taulia, and Ariba are some of the fintechs offering supply chain services to buyers and sellers, but the traditional big bank players – such as Citi Group, HSBC, BNP Paribas and Deutsche Bank – have also launched their own fintech projects. According to the HBR, multinationals such as Apple, Colgate, Dell, P&G, Kellogg’s and Siemens are all using fintech companies “to tap previously inaccessible capital in their supply chains”.

Supply chain management now about funding

The article concludes: “Traditionally, supply chain management has been about sourcing, making, and delivering. Now, it’s about “funding” – using the supply chain as a source of inexpensive capital. FinTech companies are helping to make this possible, and as they expand into new areas, their importance in supply-chain management is certain to grow.”

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