Whenever a vendor labels a solution as a ‘win-win’, treasurers naturally become suspicious. The hackles go up and the brain shuts down. In some cases, though, this well-worn phrase is entirely applicable. Eleanor Hill, Editor, TMI, investigates whether dynamic discounting deserves this label and finds out what the solution really has to offer treasurers in 2018.
One of the busiest sessions I attended at EuroFinance in Barcelona last year was the ‘Treasury Lab’ panel on dynamic discounting. It was also one of the more amusing slots, with direct competitors in the space taking the opportunity to have a polite, yet not terribly well-veiled, war of words.
Interestingly, the number of corporate treasurers looking to learn more about this up-and-coming solution was dwarfed by the swathes of anxious bankers in the room. One of the main concerns some (not all) banks have is that dynamic discounting programmes will take away from the popularity – and commercial success – of the supply chain finance (SCF) programmes that they offer. But this is just one of the handful of misconceptions that exist around dynamic discounting.
It doesn’t have to be a replacement for traditional SCF; it will happily sit alongside an existing bank-led programme (and some banks and fintechs are already collaborating to this effect). In fact, dynamic discounting can be a good way to reach the long tail of suppliers who either haven’t been considered for traditional SCF or haven’t wanted to participate in SCF programmes involving third-party funders.