The future of supply chain finance is emerging on a wide variety of platforms, and technology adoption continues to expand. Global Finance names 2020’s best supply chain finance providers.
Joseph D. Giarraputo, Global Finance’s publisher, addresses the crowd at the awards ceremony.
Supply chain finance is entering a new decade of maturity. While buyer-centric programs still dominate, focus is increasing on the need to finance the lower tiers of suppliers, those that are not the largest or most strategic companies in global supply chains. Some do not have a credit history to speak of.
But as our winners in this year’s supply chain finance (SCF) awards demonstrate, technological innovations such as distributed ledger technologies and application programming interfaces (APIs) are helping banks put the pieces of the puzzle together so that they can extend financing to the far reaches of global supply chains, long ignored by traditional trade finance banks.
Banks like DBS Bank in Singapore exemplify a new breed of SCF provider who is leveraging the latest technologies—APIs and blockchain—to provide financing more quickly to suppliers and perform credit checks in a matter of seconds.
Trade is one of the oldest businesses in banking and hasn’t always been the quickest to adopt new technologies to eke out greater cost savings and efficiencies. But change is now taking hold, no doubt spurred on by the entrance of new nonbank providers and by banks’ growing confidence in technologies like blockchain.
Our list of winners in this year’s awards is a mix of old and new. There are some well-established names in the business, like Citi and Orbian, that have earned their place on our list of winners based on their decades of experience and staying power in a business undergoing expeditious change. Equally, however, new approaches are called for by advances in technology and the need for solutions that can support larger and more-complex programs by attracting new and additional sources of funding. No provider, no matter how long it’s been in the business, can afford to rest on its laurels. Providers must continue to invest in additional functionality and new solutions that best service buyers’ and suppliers’ needs.
Solutions like dynamic discounting, that can leverage the balance sheet and excess cash of buyers, are growing in popularity. With interest rates still at historic lows, buyers are finding they earn better returns on their excess cash by using it to extend early financing to their suppliers. According to PwC’s SCF Barometer 2018/2019, reverse factoring is the preferred SCF solution in most regions and across industry sectors, followed by dynamic discounting and asset-based lending or inventory finance.
SCF is not just for large companies anymore. According to PwC, smaller companies are also rolling out programs, with finance and procurement being the departments most involved in the adoption of these solutions.
Trade and supply chain finance are now among the most exciting businesses for banks, which few would have said a decade ago. Unlike trade finance, which is still largely dominated by the banks, supply chain finance encompasses a wide range of providers—including platforms, marketplaces, logistics companies, insurers, international development entities, private investors and investment funds. Watch this space.
WORLD’S BEST SUPPLY CHAIN
|Best Supply Chain Finance Provider – Bank||Citi|
|Best Supply Chain Finance Provider – Non-bank||Orbian|
|Best Provider of Sustainable Finance Solutions in Supply Chain Finance||BNP Paribas|
|One to Watch||MUFG|
|Best Customer Implementation||HSBC and Walmart Sustainable Supply Chain Finance|
|Best Pre-Shipment Financing Solution||BNP Paribas Utexam|
|Best Post-Shipment Financing Solution||Citi|
|Best Platform Connecting Buyers/Sellers/ Financial Institutions||Orbian|
|Best Dynamic Discounting System||Kyriba|
|Best New Application of Technology in Supply Chain Finance||DBS|
|Best Inventory/Warehouse Financing||UPS Capital Cargo Finance|
|Central & Eastern Europe||UniCredit|
|Middle East||Standard Chartered|
Global Finance editors select the winners for both the Trade Finance Awards and the Supply Chain Finance Awards with input from industry analysts, corporate executives and technology experts. The editors also use entries submitted by financial services providers, as well as independent research, to evaluate a series of objective and subjective factors. This year’s ratings, which covered 97 countries and eight regions, were based on performance during the period from the fourth quarter of 2018 through the third quarter of 2019.
It is not necessary to enter in order to win, but experience shows that the additional information supplied in an entry can increase the chance of success. In many cases, entrants are able to present details and insights that may not be readily available to the editors of Global Finance.
The winners are those banks and providers that best serve the specialized needs of corporations as they engage in cross-border trade. The winners are not always the biggest institutions, but rather the best—those with qualities that companies should look for when choosing a provider.
Global Finance uses a proprietary algorithm with criteria—such as knowledge of local conditions and customer needs, financial strength and safety, strategic relationships and governance, competitive pricing, capital investment and innovation in products and services—weighted for relative importance. Each entity is rated on each separate criterion. The algorithm incorporates those ratings into a single numeric score, with 100 equivalent to perfection. In cases where more than one institution earns the same score, we favor local providers over global institutions, and privately owned banks over government-owned ones.
Kris Van Broekhoven of Citi.
BEST SUPPLY CHAIN FINANCE PROVIDER — BANK
Citi maintains an on-the-ground presence in a multitude of markets. With more than 15 years of experience structuring supply chain finance (SCF) programs, its local-market knowledge has made it invaluable to corporate clients. It continues to invest in its proprietary Citi Supplier Finance platform, which it recently integrated with its WorldLink cross-currency payments platform, enabling clients to select multiple major currencies for settlement. Citi was also one of the first providers to realize the potential of trade as an asset class in its own right; its trade asset distribution model taps into a global network of investors that supports the growth of companies’ SCF programs.
BEST SUPPLY CHAIN FINANCE PROVIDER — NON-BANK
Trade and supply chain finance have witnessed a flurry of new entrants in recent years. One provider that has stood the test of time is Orbian, originally founded in 1999 by SAP and Citibank. In 2019, Orbian managed 100-plus buyer-led SCF programs with more than 5,000 suppliers enrolled. It funds them through multiple banks and prides itself on the simplicity of its supplier enrollment process. Orbian’s e-Card, which received Global Finance’s Innovator Award in the Corporate Finance category in 2019, is a welcome innovation, providing early liquidity to suppliers of all sizes, not just those with the largest procurement volumes.
Best Provider of Sustainable Finance Solutions in Supply Chain Finance
The French bank is at the forefront in recognizing the role SCF can play in promoting not only more-sustainable supply chains, but greater corporate social and environmental responsibility among suppliers. By using early payment or more-attractive financing terms to incentivize suppliers to promote or support environmental, social or good governance practices, BNP Paribas argues it is positively impacting the entire supply chain. Case in point is its work with sportswear manufacturer Puma, which formally committed to eliminating hazardous substances from its supply chain by 2020, and offered its base of suppliers discounted financing contingent on support for environmental and worker-friendly improvements. BNP Paribas has also developed its own framework for benchmarking suppliers’ sustainability levels.
Maureen Sullivan of MUFG.
ONE TO WATCH
In January 2019, Japan’s MUFG Union Bank acquired GE Capital’s Trade Payables Services platform. The acquisition put the rest of the banking community on notice that MUFG is serious about making inroads into the supply chain finance sector. Prior to the acquisition of GE Capital’s platform, MUFG’s supply chain finance business in the Americas used strategic partnerships with technology providers to provide working capital finance. The GE acquisition gives MUFG a significant head start by leveraging a platform that provides accelerated payments to more than 30,000 suppliers globally. When the remaining GE suppliers are onboarded in the coming year, MUFG will lead one of the biggest supply chain finance programs in the business.
BEST CUSTOMER IMPLEMENTATION
HSBC and Walmart Sustainable Supply Chain Finance
Using supply chain finance to promote sustainable corporate business practices is one of the signal SCF innovations of the last decade. A leading example is HSBC’s work with Walmart to promote greater sustainability in the retail giant’s supply chain by tying the financing rate to suppliers’ sustainability credentials as benchmarked against Walmart’s Sustainability Index. The retailer also launched, in 2017, Project Gigaton, which aims to reduce greenhouse gas emissions in its global supply chain by 1 billion metric tons by 2030 by offering preferential financing rates to suppliers that show progress toward sustainability goals.
BEST PRE-SHIPMENT FINANCING SOLUTION
BNP Paribas Utexam
Providing financing early in the supply chain cycle, before the buyer has approved the invoice and even before the goods have shipped, is not something banks have historically done well. Most buyer-led SCF programs are still focused on providing financing to suppliers following buyer approval of the invoice. Recognizing the importance of earlier financing, BNP Paribas’ Dublin subsidiary Utexam offers what it terms “flash title” (referring to the legal title or ownership of an item) and “just-in-time” management of raw materials and semifinished goods. Utexam can also purchase product from suppliers, effectively owning it until it is needed for production. That helps companies free up cash that is “trapped in the working capital cycle,” according to Utexam.
BEST POST-SHIPMENT FINANCING SOLUTION
Citi enables buyers to extend their days payable outstanding by offering early payment or opportunities for discounts to suppliers. The advantage for buyers is that they can enhance their working capital without harming their suppliers that have access to more-affordable financing. Recent upgrades to Citi’s offering include an enhanced dashboard for monitoring global SCF programs; integration with WorldLink, a mobile solution that allows suppliers to quickly check the status of their payments and discount requests; and a simplified online sign-up process for suppliers
BEST PLATFORM CONNECTING BUYERS/SELLERS/FINANCIAL INSTITUTIONS
Orbian’s SCF solution includes a multibank funding model that gives companies access to a wide range of funding sources beyond their traditional cash management provider. Companies can also access multiple investors to broaden the available funding pool: an important feature for larger programs spanning multiple suppliers and jurisdictions. Orbian’s web-based system is easy to use and designed to ensure maximum participation by all suppliers.
Order-to-pay or procure-to-pay software helps companies streamline and automate the procurement process. Within the supply chain, higher levels of automation help create greater efficiencies, reduce cost and speed up the process, all of which ease the pressure on working capital since suppliers are likely to get paid more quickly. Basware provides both procure-to-pay and e-invoicing solutions and is best known for its invoice automation solutions. The Finnish company also operates one of the largest open business-to-business e-invoicing networks, with 1 million buyers and suppliers exchanging orders and invoices.
BEST DYNAMIC DISCOUNTING SYSTEM
Dynamic discounting solutions are a popular alternative to bank-financed SCF programs: The buyer receives a discount on approved payables in return for early payment to its suppliers, and can leverage its own balance sheet or reserve cash instead of relying on bank financing. Invoices are typically discounted on a sliding scale. Buyers use Kyriba’s Dynamic Discounting platform to finance suppliers using their own surplus cash. Scientist.com has used Kyriba’s SCF platform to develop SciPay, launched in mid-2019, which enables suppliers of pharmaceutical R&D services to receive early payment and dynamically discount invoices. In December, Kyriba announced that SciPay had reduced payment parameters for users by an average of 60 days and generated $4 million in early payments to suppliers.
BEST NEW APPLICATION OF TECHNOLOGY IN SUPPLY CHAIN FINANCE
Singapore-based DBS Bank officially launched its blockchain-based supply chain management platform for the Chinese market, Rong-E Lian, in September, although its first transaction was completed in August. Leveraging its expertise in application programming interfaces and the blockchain, DBS partnered with an unnamed Chinese logistics provider to develop the platform, which provides lower-cost financing to more than 1,000 upstream suppliers by leveraging the logistics provider’s credit rating. Financing is provided within 24 hours, DBS says, which is no mean feat given that know-your-customer and credentials checks must be performed at scale and many suppliers may have little or no credit history. To help validate transactions, the platform is integrated with Chinese government databases; DBS says checks are executed in a matter of seconds.
BEST INVENTORY/WAREHOUSE FINANCING
UPS Capital Cargo Finance
Who better placed to finance inventory or warehousing of goods and materials than logistics service providers, who transport or ship goods wherever they need to go? Banks have traditionally shied away from this area of financing because of the risks involved, particularly if ownership of inventory is disputed and the bank, for whatever reason, must take ownership of the goods. But UPS’ financial and payment solutions division, UPS Capital, offers Cargo Finance, which aims to solve the conundrum many suppliers face when trying to finance new inventory to fulfil more orders. Cargo Finance lends against in-transit inventory and, given the parent company’s strength in warehousing and inventory, promises to do so on more-attractive terms than more-traditional financiers.
Citi has more than 17 years of experience, globally and regionally, in SCF; and its Treasury and Trade Solutions division continues to generate strong annual revenue growth. Over the past few years, the bank has worked to more tightly integrate its offering with corporate customers’ enterprise resource planning systems and streamline supplier onboarding, which is essential to the success of any SCF program.
SCF solutions continue to mature in the Latin American market. One of the banks leading the charge is BBVA, which offers solutions in Mexico, Peru and Colombia, among other countries, with Mexico its biggest market by far. Currently, each country boasts its own local SCF platform; but BBVA says it is working to deliver a new global cloud-based platform that will provide funding in the supplier’s time zone, a standardized payment services agreement for each customer, and an enhanced user interface for onboarding suppliers. The new global platform is scheduled to roll out across 2020, promising more-competitive funding in multiple currencies.
The Santander Group has consolidated its leading position in SCF in European markets including Spain, the UK, Germany and France. Europe remains its biggest market by number of programs and advanced payments made to suppliers under its trademark. Santander’s Confirming (Reverse Factoring) platform advances early payment to suppliers based on approved invoices. The bank has also introduced Pre-Confirming, which provides financing to suppliers earlier, before the buyer has approved invoices. Santander supplies SCF solutions in more than 20 countries and multiple currencies and sectors (energy, agribusiness, mining, and automotive). It has also developed new risk models to expand the buyers and suppliers it can work with, and is leveraging fintechs to improve the user experience.
CENTRAL & EASTERN EUROPE
Describing itself as a pan-European bank, UniCredit boasts an extensive Eastern European network embracing, notably, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Romania, Russia, Slovakia, Slovenia, Serbia and Turkey. The bank is among the top five banks in nine CEE countries based on total assets. The region is the second-largest contributor to the bank’s total revenues behind Italy. UniCredit is working with third-party providers, including fintechs, to upscale its working capital offerings and offer a true multibank service for more-sizeable SCF programs.
The Asian juggernaut is on a digital transformation journey that includes investing in a series of digital supply chain initiatives that aim to minimize inefficiencies and costs for clients.
The bank’s supply chain finance programs encompass several key Asian markets and it continues to evolve its product line, introducing financing solutions that help small- to mid-sized companies get paid before goods are shipped. Recognizing that the future of supply chain financing is not just in proprietary solutions, DBS is also working with innovative fintechs, for example on new, bank-agnostic marketplaces in the area of asset-based financing.
Standard Chartered has a long association with the Middle East and a presence in major regional markets including the UAE, Jordan, Bahrain, Qatar and Oman. Customers benefit from its savvy at structuring and managing a range of SCF programs for customers across the Middle East as well as North Africa and Asia. Standard Chartered works with some of the largest companies in the region and offers financing at different stages in the supply chain, including inventory and post-shipment financing.
In Africa, where SCF is still a relatively new offering, Standard Bank has benefited from partnerships with China’s ICBC to help service customers trading between the continent and China. Standard Bank maintains a strong network and institutional knowledge of business in 20 countries across sub-Saharan Africa, where SCF programs are beginning to give local suppliers access to more-affordable, new and diversified sources of funding. Standard Bank has partnered with third-party platform providers to win larger complex deals in the region as well as acting as sole funder on transactions.
Scotiabank has maintained a presence in the Caribbean for more than 100 years and has operations in 25 countries across the islands and Central America. An on-the-ground presence is important when it comes to structuring SCF programs in this diverse region. Scotiabank recently divested some of its Caribbean presence with the sale of operations in nine markets to Republic Financial Holdings, in order to focus and strengthen its offerings across the region. Meanwhile, Scotiabank continues to build out its Latin American operations.