Supplier finance providers are tapping into a wealth of data to offer funding to suppliers earlier and faster than ever before, according to the panellists at the latest online event from the Supply Chain Finance Community.
The session, entitled New ways to finance SMEs: How data is driving a fresh approach, gave the first look at a new offer from DBS Bank, the Electronic Irrevocable Payment Undertaking (EIPU), issued by anchor buyers to tier one suppliers, which can then be passed down the supply chain to tier two and beyond and used by even the smallest suppliers to access finance.
These developments are being made possible by the growing availability of data on businesses, a situation highlighted by Professor Michael Henke of Fraunhofer IML in his introduction. Henke looked forward to a future in which the combination of the Internet of Things (IoT) and distributed ledger technology genuinely links the physical and financial supply chains.
His theme was taken up by Gary Schneider of Infor Nexus, who outlined the use of milestones and data analytics to provide financing at a much earlier stage in the supply chain than had previously been possible. “By managing each step in the supply chain, past performance, order changes, dilution rates, and payment history can be used to improve pre-shipment risk analysis to create new forms of financing,“ he said.
Amit Agarwal of DBS explained that, using the EIPU, DBS had become the first foreign bank to leverage blockchain and API technology for multi-tier supplier financing in China for the anchor buyer Rong E-Lian.
All the presenters agreed that the Covid-19 crisis has accelerated the adoption of digital trade and supply chain processes, making it more possible than ever before to bring financing to companies who might previously have been unable to access it.
The audience for this online event clearly agreed: Asked whether they themselves were using alternative data sources to make financing decisions, 47% said they were and 44% said they planned to.
The full event is available on-demand here.
The next SCF Community online event is Distributor financing: The other side of SCF on Thursday, August 27th 2020 at 16:00 (SGT)/ 10:00 AM (CET). You can register to attend, free of charge, here.