Transaction banks work to define common standards for supply chain financing

Transaction banks work to define common standards for supply chain financing

With the market for supply chain finance (SCF) schemes set for explosive further growth, Europe's largest transaction banks are coming together to define common terminology as they look to expand their range of services and compete for cross-border business.

Recent research from Deminca cited SCF as the 'must have' accessory for transaction banks, revealing average annual SCF growth rates of between 30% and 40% at major international banks.

The topic was high up the agenda at the recent EBAday conference in Berlin, where the Euro Banking Association published a comprehensive guide to the business, exploring market opportunities for possible SCF services and making recommendations for a definition of a common terminology for the financial supply chain.

Erkki Poutiainen of Nordea Bank Finland is chairman of the EBA Supply Chain Working Group. He took time out with Finextra to explain why SCF is now the hot "new thing" for transaction banks and the importance of establishing an agreed market structure and common terminology for the business.

Eugenio Cavenaghi, director trade & working capital at Barclays Bank says that smaller corporates are finding it hard to find access to credit. Supply chain finance can "bridge that gap" for firms, who do not have the resources of large, multi-national organisations who are seeking international financing support.

He highlights three areas where banks can collaborate and work together in offering supply chain financing services, referencing supplier onboarding, technology and infrastructure support, and credit availability.

Cavenaghi spoke to Finextra after coming off the 'Supply chain finance - getting the formula right' panel at EBAday.

You can watch a longer version of this panel here.

Comments: (2)

Nick Ogden
Nick Ogden - RTGS.global - London 05 June, 2013, 10:44Be the first to give this comment the thumbs up 0 likes

The new Payment Banks who serve "businesses only" create new opportunities in SCF for  the customers they serve. For example, a Payments Bank could act as a lending facilitator, not as a principal, and enable its customers to "auction off" their supply chain receivables on a regular basis, as well as other financing requirements they may have, to obtain the best terms. The competitive tension that this approach introduces should reduce cost and may encourage or stimulate much needed economic growth, given the lack of credit from that is available for "general working capital".

 

Nigel Woodward
Nigel Woodward - WWFMS Ltd - London 06 June, 2013, 08:06Be the first to give this comment the thumbs up 0 likes

SCF has to be the future. We are moving from 200 years of "doc credits" and "trade finance" to SCF, working capital and SME directed quantitative easing. With low cost technologies, cloud and service provision and cultural acceptance of online models - we can look to new risk aware competitively priced financing structures to sit alongside the core functions of physical supply chain, EDI, and settlement (payments).

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