It’s Not a Party Without A Third Party!

I’m often asked if using an open, bank independent supply chain finance technology platform to separate the SCF services provider from the finance provider reduces costs in an SCF program. It does and the reason is simple–competition. An open supply chain finance technology platform that is bank independent is in a much better position to ensure efficient liquidity pricing over the life of the supply chain finance program through the ability to bring in multiple banks to ensure price competition. Also, larger suppliers who might want to negotiate price have more liquidity options. The bottom line is that the buyer has a much greater ability to influence bank behavior and drive best practices (including price) when the supply chain finance technology platform has the ability to utilize multiple independent banks, whether the buyer ever uses that leverage or not. With a bank proprietary platform, the buyer loses leverage, and ultimately control, over bank pricing since the lead bank controls their own pricing as well as any syndicate pricing. In addition, independent technology/services firms also provide integrated services which are crucial for the success of a supply chain finance program. These services include optimizing payment terms through benchmarking by commodity class, designing the supply chain finance program, supplier prioritization, Procurement training, the use of web-based technologies for supplier marketing, etc. These services must be provided to ensure a successful supply chain finance program, whether they are provided by a bank, a technology/services provider or the buyer themselves. What do companies think about this? In a CFO magazine survey, two-thirds of respondents said a bank independent platform was a requirement for supply chain finance. It’s not hard to understand why.