After 25 Years, SCF 1.0 Needs A Makeover

For supply chain finance (SCF) to progress and reach the next set of struggling suppliers, the model needs a rethink. We need SCF 2.0.

Getting to grips with late payments is easier said than done. A single purchase from end-to-end involves multiple departments, and often requires a whole host of steps to ensure compliance.

On face value, SCF looks like the late payments silver bullet. It allows a third-party funder to forward the value of an invoice, minus a small charge, on to the supplier just a few days after the invoice has been approved. Then, the SCF provider recoups the money on the back-end of the payment process, perhaps some 120 days later.

But, SCF has been around for some 25 years and late payments, particularly for small suppliers, have gotten worse. Further, banks’ revenues from SCF stand at just $2.8 billion per year, a drop in the ocean of global trade [1] . What is going on here? To answer that, we need to look into the SCF fine print.

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