|Alternative Funding Network|
For the next Alternative Funding Network seminar, on Thursday March 16th, we're bringing together a group of companies that are working to change the way corporate supply chains are funded, using different takes on Supply Chain Finance.
The supply chain has long been a conundrum for financiers, remaining a relatively niche product, given some of the legal, risk and operational complexities that can arise. Can technology help to overcome some of those challenges? Or even reinvent the traditional business model?
The upcoming AFN seminar on 16 March, “Technology in the Supply Chain”, at Fox Williams will take a closer look at this technology and business models in more detail, but below is a quick taster of things to come.
The cloud-based approach - tech and web-based players have entered the supply chain finance space to challenge incumbent banks with new innovative business models, improved digital interfaces and tools, smooth implementation and onboarding. International tech company, Taulia, is one such company, offering a number of products designed to enable better cashflow through earlier payment of invoices at a discount. One such option is dynamic discounting which gives buyers more flexibility to choose how and when to pay their suppliers in exchange for a lower price or discount for the goods and services purchased. The “dynamic” component refers to the option to provide discounts based on the dates of payment to suppliers. British based URICA Supply Chain Funding operates a similar model, using its platform to buy single invoices from suppliers at a discount, ensuring there is no debt or credit risk taken on by the supplier, and then pursues payment of the invoice directly from the buyer. URICA bases its decisions to lend on the buyer’s, not the supplier’s financial strength.
The marketplace approach – taking a leaf out of disruptive Silicon Valley tech giants, C2FO has sought to reimagine supply chain finance by reinventing the business model. They bring buyers and their suppliers together in a live marketplace (think Ebay for the supply chain) without intermediaries to find a real-time rate for cash flow. Many buyers have excess cash and are looking to generate income on that cash. In the C2FO marketplace, those companies can set their desired rates of return on the cash they wish to make available and the market will fill those orders with requests from other companies that need cash. Those companies that need cash have set their requested amounts of cash and the rates they will pay to receive that cash. They have created a solution without the need for third party finance!
Blockchain – the future? Whilst not represented at the upcoming seminar, Tallysticks is a great example of the use of technology as a game changer. They utilise blockchain technology to automate invoicing, and document when, how and if invoices issuances, payments, financing and settlements are performed. In addition to automated invoicing, the platform offers enhanced security between parties to invoices, smart contract technology enabling invoices to be marked as settled as soon as the bank receives payment, and the ability to buy and sell invoices on the marketplace. It can also assist investors to evaluate credit risk of invoice payers, by using company transaction history captured by the distributed ledger. Is this the future of finance on the supply chain?
With multinationals using the likes of Taulia and C2FO, is the future of supply chain finance in the hands of the Tech giants, or will the incumbents start clawing back their market share? Investments by incumbents, such as Barclays’ support for Tallysticks, show that the race is wide open.
Jonathan is a partner in the FinTech and Alternative Finance team at Fox Williams, a City-based Law Firm. He advises clients across the FinTech and Alternative Finance spectrum, from start-ups disrupting existing markets with innovative technology to financial institutions looking to invest in new technology.
Fox Williams LLP are experts at advising entrepreneurs and FinTech businesses in particular in the P2P and crowdfunding sector. For more information as to how Fox Williams can help you (including arranging a free consultation) or for further information on the issues discussed in this article, please liaise with either Jonathan Segal or Daniel Geller.