The supply chain finance market is expected to grow at a [compound annual growth rate] of 8.8% from 2022 to 2031, from its estimated $6 billion in 2021 to $13.4 billion by that time.
Supply chain finance (SCF) has become more accessible and efficient due to technological advancements in automation and digitalization. This has resulted in the emergence of numerous platforms and solutions that simplify the processing of invoices and payments, making SCF programs easier for businesses of all sizes to implement.
The intricacy of supply chains has increased, which makes effective working capital management extremely difficult. Through the acceleration of suppliers’ receivables and the extension of buyers’ payables, SCF can close the gap between payment terms and the actual flow of goods, assisting both buyers and suppliers in improving their cash flow.
In erratic times, it is also a reasonably safe investment. Furthermore, other institutions are joining in as well. It is seen as a desirable asset class by institutional investors, and fintech SCF platforms are increasingly contributing to the reduction of the trade finance gap through partnerships with banks and other alternative investors.
By lowering operational and legal obstacles, regulatory changes—such as the UK’s Electronic Trade Documents Act of 2023—can promote the adoption of SCF in the trade finance sector. It’s important to note that SCF scrutiny has been on the rise globally. A US Accounting Standards Update, released by the Financial Accounting Standards Board in September 2022, went into effect in 2023 and mandated that important terms and obligations of the SCF program be disclosed on the balance sheet in quarterly and annual reports.
Businesses are under increasing pressure to recognize and manage risks to human rights and the environment throughout their supply chains. For example, the EU’s 2019 Green Deal mandates that goods sold within the EU and commodities traded through the EU must be responsibly sourced and produced. January 2023 saw the implementation of the EU’s Corporate Sustainability Reporting Directive.
Environmental, social, and governance (ESG) goals have been greatly impacted by consumer attitudes; however, supply chain vulnerabilities are compelling companies to reconsider supply chain governance (SCF). SCF is being used more and more to promote sustainability throughout supply chains as a tool and an incentive. Banks and nonbanks alike are expanding the range of sustainability-related SCF products they offer.
Sustainability is central to both the corporate goal of MUFG and the character of the bank. MUFG has committed to investing over $330 billion directly into sustainable finance by 2030, in addition to its net-zero operations plans. It is also stated to be the biggest bank in the US for financing renewable energy projects and the world’s top arranger of renewable energy.
“Within supply chain financing, we see companies at different stages of their ESG journeys depending on alignment between their procurement and sustainability teams, often with competing priorities and separate reporting lines. So, we meet our clients at their point of need no matter where they are in that journey,” explains Maureen Sullivan, managing director and global head of SCF at MUFG.
“Some clients face financial stress in their efforts toward net-zero emissions and need financing structures that enable their transition sustainably,” Sullivan adds. “For those clients, we offer transition SCF financing, where we ring-fence select suppliers that can provide sustainable improvements as the client transitions to a greener business model.”
“For clients further down the path,” she continues, “we provide financing incentives to drive positive supplier behavior. Based on their chosen KPIs, many companies want to use SCF to encourage and promote a sustainable and socially responsible supply chain. We offer an independent third party to evaluate a supplier with an ESG score and, based on demonstrated improvements over time, offer that qualified supplier a tangible incentive such as a more attractive financing rate. ESG scoring is tiered for small to midsize suppliers, while we create bespoke KPIs for large suppliers based on publicly stated long-term measures to access preferred rates.”
Building resilient supply chains is crucial, as evidenced by recent global events like the COVID-19 pandemic and other ongoing disruptions to the supply chain. By facilitating access to financial resources and enhancing cash flow management, SCF can strengthen this resilience.
All things considered, several factors combine to propel SCF’s growth and make it a desirable option for companies of all kinds. Its utilisation is expected to be propelled by its capacity to enhance working capital management, cultivate more robust supplier relationships, and alleviate risks in intricate supply chains.
| Global Winners | |
| Best Supply Chain Finance Provider – Bank | Citi |
| Best Supply Chain Finance Provider – Non-Bank | Orbian |
| Best Customer Implementation | MUFG |
| Best Dynamic Discounting Solution | Premium Technology |
| Regional Winners | ||
| Africa | CIB | |
| Asia-Pacific | DBS | |
| Caribbean | IDB Invest | |
| Central & Eastern Europe | ING | |
| Latin America | Santander | |
| Middle East | Emirates NBD | |
| North America | Bank of America | |
| Western Europe | BBVA | |
Citi’s supply chain finance (SCF) network serves over 4,000 buyers and 95,000 suppliers across more than 90 countries. Having been in operation for nearly 20 years, Citi Supplier Finance offers digital platforms that optimize workflows, an easy-to-use technical implementation that can be customized to fit different enterprise resource planning (ERP) systems, and simple electronic supplier onboarding. Citi Dynamic Discounting is one of the more recent additions. It allows clients with large sums of money to put extra liquidity straight into their supply chain and helps small and midsize suppliers increase cash flow. For both SCF and dynamic discounting, Citi is the only bank providing a single platform and file transmission. Citi Supplier Finance provides a mobile app for suppliers to choose which receivables to discount.
Focusing only on SCF guarantees that the provider takes a very personal and long-term approach to clients. For example, relationship managers stay in charge for the duration of each SCF program.
Because of Orbian’s relationships with numerous domestic and foreign banks, customers can access limitless funding capacity at competitive prices. For multinational companies and their key supply chain partners, Orbian can ensure high security, low cost, easy implementation, and guaranteed liquidity thanks to multibank funding and automation.
Last year, MUFG saw a double-digit increase in SCF mandates won. Deals in SCF usually take more than a year to cultivate because of its lengthy sales cycle. Asia, Europe, and North America are among the competitors. Although traditional SCF affects the balance sheet, MUFG’s solution also meets the needs of businesses trying to increase working capital and extract value from their international supply chains. Dynamic discounting from a single platform and buyer-led programs round out a comprehensive set of working capital enhancements that also include virtual cards and e-payables. To protect clients’ balance sheets, MUFG offers highly structured supplier-led receivables purchase programs that offer quick cash and risk-mitigation solutions.
By connecting anchor clients with the value chain life cycles of suppliers and buyers, Premium Technology’s FinShare modular, single-platform ecosystem integrates and unlocks working capital solutions to improve customers’ value proposition. FinShare handles more than 50 million transactions a month and provides daily services to more than 50,000 corporate clients across more than 100 countries.
Businesses can extend financing further into the supply chain with FinShare’s deep-tier financing feature, increasing efficiency and liquidity. This results in a smoother and more economical operation by improving supplier collaboration and streamlining the entire SCF process.
The SCF electronic module (e-SCF) from CIB was created for buyers and sellers looking for a more effective way to manage their businesses. The e-SCF module connects CIB’s anchor customers with suppliers who can manage extremely high volumes and smaller ticket sizes, offering increased control, reduced costs, and enhanced business efficiency. Digital invoices and purchase orders can be sent and received between buyers and sellers, financing can be requested, payables and receivables can be tracked online, and working capital can be accessed more quickly and for less money.
The DBS Ideal Supplier Hub, which was introduced in the fall of 2022 and is now being sold in China, Hong Kong, Indonesia, India, and Singapore, is a one-stop, value-added digital service that serves suppliers of anchor buyer clients who use DBS’ supply chain programs. Suppliers can choose which invoices to finance, view their invoices and payments in full, check the status of their transactions digitally, and download reports for tax or audit purposes. Future goals for DBS include promoting connectivity between buyer/supplier ecosystems and assisting buyers and suppliers in collaborating on environmental, social, and governance initiatives.
Using its experience in trade finance, IDB Invest has broadened the scope of value-chain finance solutions it offers, guaranteeing increased competitiveness for buyers and sellers through financing small and medium-sized businesses, introducing novel programs and services, and providing financing to economies in Latin America and the Caribbean.
Value-chain finance solutions help companies reduce the amount of time it takes to sell inventory, collect payments from clients, and pay bills by releasing cash that has become stuck in their supply chains. IDB Invest gives small and midsize buyers and sellers in Latin America and the Caribbean access to the region’s supply chain, enabling them to establish a presence and boost the local economy.
With over 14,000 active suppliers enrolled in distinctive SCF programs, ING has expanded its global portfolio to approximately 200 programs. ING’s co-created Terra approach, which evaluates whether a supplier’s lending across sectors is in line with the UN’s goal of net-zero emissions by 2050, places sustainability at the center of its offering.
A growing number of buyer subsidiaries and suppliers from Central and Eastern Europe, including the Czech Republic, Hungary, Poland, Romania, Bulgaria, Slovenia, and Slovakia, are enrolled with the bank.
Santander’s Global Confirming platform is the bank’s largest SCF network, with over 400,000 suppliers participating in its SCF ecosystem, approximately 3,000 supply chain programs spread throughout the Americas, Europe, and Asia-Pacific region, and over 30 years of experience providing SCF solutions. To assist its clients in navigating supply chain disruptions and expediting the decarbonization of their industrial activities, the bank is looking forward to a new partnership with SAP that will offer next-generation, seamless integration of ERP and SCF.
Emirates NBD creates unique SCF solutions, like payable and receivable financing for customers and their suppliers, using cutting-edge analytics. API Souq is a developer portal that facilitates the development of creative trade finance solutions by fintechs, developers, and corporate clients. Clients can quickly and broadly commercialize the program across all supplier tiers with the help of digital supplier onboarding. A clever text-matching tool that recognizes variations from the customer’s standard templates is included with Paperless smartGuarantees. An end-to-end digital experience is ensured by management information systems and APIs having ERP-ready connectivity. Corporations can encourage their suppliers to implement sustainable practices by implementing a sustainable supply chain program.
Bank of America (BofA) launched multiple new CashPro trade capabilities for SCF service providers in 2023 in addition to its Open Account Automation. These capabilities included a new third-party module and channels via both host-to-host information exchange and API. Suppliers can automate procedures, such as uploading invoice details and accepting invoice discounts, with the help of a trade receivable finance module.
BofA has introduced an SCF variant in India wherein it serves as the agent in charge of paying suppliers for invoices that have been approved. Working capital optimization for the buyer and supplier uptake is greatly accelerated by automating supplier verification and digitizing supplier onboarding through the use of external registries and databases to streamline the supplier know-your-customer process.
With over 245,000 active suppliers on board and over 14,000 reverse-factoring programs in place, BBVA’s global SCF solution is highly effective. The bank introduced a cloud-based worldwide SCF platform in 2020. It can be accessed from a single point of access and offers a consolidated view of all of the business’s suppliers and programs simultaneously in all locations and currencies.
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