In an increasingly competitive supply chain finance ecosystem – consisting of banks, non-banks, and a combination of the two – what makes a payables finance programme ‘successful’? And how can corporate treasurers select an effective provider? Anil Walia, Deutsche Bank’s Head of Financial Supply Chain Finance, EMEA, suggests that corporates need to ask their providers three simple questions.
In the late 1990s and early 2000s the payables finance landscape comprised only a handful of banks implementing programmes as working capital solutions for their largest corporate clients. And even then, it was largely limited to the retail and manufacturing sectors. In such a landscape, choosing a payables finance provider was simple.
Two decades on and the picture is quite different. Payables finance has become big business: in 2016, global volumes were estimated at US$447.8bn. As the market has grown, so has the number of providers seeking a slice of the action. According to PwC, non-bank fintech providers now hold 14% of all payables finance programmes. Broadly speaking, these third-party providers place emphasis on their funder-agnostic digital interfaces, simplified implementation and on-boarding processes, and different business models – such as those focused on smaller suppliers. However, not all third parties are the same – there are multiple providers all of which offer slightly different solutions.
How can corporate buyers make sense of this increasingly competitive environment? We believe they need to be asking three simple questions of their provider: is the payables finance programme easy to set up, can the provider on-board suppliers efficiently across all relevant geographies and, finally, is the programme safe and sustainable?