The Greensill debacle put the supply chain finance market to test. And what happened? Nada, niente, nichts, niks. Really nothing. Surely not what journalist like to write. And admittedly, Greensill does make a colorful story. About the farmer turned knighted banker. About an Indian steel tycoon and former prime ministers. About rogue traders and billions of dollars. But all of this did not affect the SCF market itself. Existing SCF programs continued, Funding lines remained. Suppliers got paid. Moreover, it was reported yesterday that even the funding for SCF programs that Taulia sourced for Greensill have now been quietly taken over by JP Morgan, UBS and Unicredit. Business as usual. Let me explain.
Any solid supply chain finance program rolled out by the multinationals relies on technology platforms. These platforms link with their systems and generally facilitate the onboarding of many suppliers, invoice approval process, (pre)payments through banks as well the administrative execution.
And even though Greensill was active in the SCF space as a funder, they actually had never developed such an operational SCF platform themselves. Instead, they relied heavily on these technology providers to supply them with customers and purely focused on providing the funding. Taulia is such a technology partner and was an important source of SCF business to Greensill.
It was therefore not surprising at all to read in the newspapers that Taulia quickly teamed up with a group of banks, reportedly led by JP Morgan and supported by UBS and Unicredit, to organize approx. USD 4 bln of the SCF funding previously provided through Greensill. This will certainly be a strong diversified portfolio of SCF programs for large multinationals.
This move by Taulia and the banks is effectively the expected portfolio split of the Greensill portfolio in “good” and “bad” assets. The traditional SCF business has easily found its way to these new bank funders. A liquidation scenario can be expected for the remainder of the Greensill portfolio of structured assets. And the Greensill saga itself will probably continue but for supply chain finance it stops here.
This latest development confirms not only the importance of the technology platforms for SCF but, more importantly, the availability of funding for these programs even in times of market turmoil. Remember, this is all about traditional SCF, about millions of supplier invoices confirmed by large creditworthy multinationals. Not sexy. Not risky. Not complicated. This also shows that the traditional SCF business has reached maturity. Its technology is mature. Its funding market is mature. Its players are mature. So maybe the good thing about the Greensill saga being all over the news is that every treasury and procurement department is now fully aware of SCF. It is now up to the SCF players to further educate the multinationals on its application. But I would expect that SCF will further grow to become the standard instrument for supplier (risk) and payable management.
This is the third article in a short series based on an ongoing market survey, interviews and the many news articles. Share your views/experiences as well via this link. https://bit.ly/3rufgHb. Survey closes today.