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April 17, 2013: The Start of a New Era in Global Supply Chain Finance?

by Dr Sebastian Hölker, Head of Global Innovative Trade Products, UniCredit

Recently, a German newspaper published an article about innovations in payments. It started with the provocative assertion that whilst we are quite advanced when it comes to the management of transportation, warehousing and the like (RFID chips, GPS trackers, real time access on all relevant data), it seems that nothing really significant has happened in the last 30 years regarding payments. The parties are still left more or less in the dark about a payment’s status while it is being processed and have little or no influence on the exact speed and detail of execution.

One may doubt whether the world truly is so clearly divided into black and white, but it is obvious that this is only one of many recent examples that all point in the same direction if put into the wider context of international trade: The physical supply chain and its management have currently outrun the financial supply chain and the services provided therein. Outrun in this context can by all means be read in the literal sense of the word as very often, the delivery of services and goods has already taken place whilst the corresponding financial transaction is far from being completed.

But do such observations reflect the true status quo of the interaction between the physical and financial supply chain?

In the last couple of years, technology and standards have made enormous progress. Reasonably up-to-date supply chain management applications (both for the physical and the financial supply chain) as well as ERP systems have no problems understanding and processing different file formats and data structures – with the added ability to convert formats and structures and keeping data losses and truncations to a minimum. Communication standards have overcome the barriers between different industries – in particular, the SWIFT MT 789 has facilitated the corporate-to-bank and the bank-to-corporate communication quite significantly. Thanks to this recent progress both in technology and standard setting, the stage is set for the financial supply chain to catch up and match speed with the physical supply chain.