Supply chain finance has taken off in recent years, fueled by companies’ greater focus on working capital management, as well as banks’ retreat from lending in the wake of the financial crisis.
“Almost every business is becoming increasingly global and that stretches their supply chain out a lot,” noted Craig Jeffery, managing partner at Atlanta-based consultancy Strategic Treasurer.
Companies should also look at the capabilities of the platform itself. “How easy is it for a vendor to self-serve, update payment information, communicate about payments?” Jeffery said. “Process efficiencies have often been overlooked because people went to supply chain financing for the financing part of it. But the efficiencies that are being built in are generating some pretty significant yield.”
Banks vs. Fintech
While banks dominate the supply chain finance market, Strategic Treasurer’s report notes the growing role of fintech platforms. It cites a McKinsey report estimating that as of 2015, banks had about 85% of the global supply chain finance market, while fintech firms had 15%. In contrast, in 2005, banks had 95% of the market and fintech just 5%.