In the last post I noted a company may want to send its bank a payment instruction containing invoice detail that can be uploaded into a bank’s supply chain financing platform. In fact, billions of dollars in payments are initiated through electronic trade payments, containing invoice detail, daily. This payment volume far out-strips the volume of supplier financing being performed on bank open account supply chain financing platforms today.
Why is this so? Simply, supply chain financing systems are run typically from the bank’s trade services organization — the group that delivers letter of credit financing to customers — or, in some cases, through the bank’s business credit organization. Electronic payments are delivered through the payments or disbursement services group. Whilst these groups may come together under a “transaction services” organizational umbrella, seldom do they coordinate their development strategy supporting a holistic financial supply chain solution.
The real opportunity for banks to achieve breakthrough growth in open account supplier financing is integrating their electronic payments and trade / supply chain finance platforms. When receiving the electronic payment destined for international suppliers, banks can cull the electronic invoice details from the payment. They can warehouse the payment until the payment due date and make an offer to the supplier.
This data stream of open account invoices is flowing through banks today — largely untapped. For banks that can integrate their payments and trade services into a unified financial supply chain platform, the finance rewards could be considerable.
