David Gustin, CFA
President, Global Business Intelligence, Co-Founder Trade Financing Matters
Even McKinsey Does Not Fully Understand Supply Chain Finance
Yeah, I knew that headline would grab attention. And it can come off as arrogant. But look, I have a right to be critical of consultants (yes I was one many eons ago with Booz Allen & Hamilton). And in Mckinsey’s latest Payment newsletter (Oct 2015) the article Supply-chain finance: The emergence of a new competitive landscape they confused the market by how they lumped vendors together.
How so? Well it gets back to the fact that everyone is racing to cover all thing fintech as it relates transactional finance and doesn’t fundamentally understand the different business models. So companies get lumped together that should not be. And this confuses the market and it ultimately confuses buyers.
I will give you an example in the piece. The graph below talks about Fintechs offering solutions across the Procure to Pay cycle.
You can see companies like PrimeRevenue and Orbian are thrown into the same sandbox as Demica and Taulia. While Demica has a supply chain software product called Citadel, Demica licenses software to the banks to run supply chain finance. With their new owners (recently bought by investment bankers JRJ Group, TomsCapital and 76 West Holdings) they are moving to a non bank funding model that competes with banks. Taulia is an einvoicing vendor that has been a marketing genius at creating a financial supply chain company out of their dynamic discounting offering and relationship with Greensill Capital. But both PrimeRevenue and Orbian have been creating large corporate assets out of approved invoices for bank and non bank consumption for a long time for very large suppliers.
The next horizontal is even more interesting with TradeCard and Tradeshift. How those two got together I’ll never know. First TradeCard was acquired by GT Nexus which recently was acquired by Infor. Second TradeCard would never describe themselves as an einvoicng platform but brands themselves as a supply chain collaboration platform. Their platform enables companies to run Direct Sourcing and Import programs through a cloud-based platform connecting forwarders, suppliers, large Corporate buyers, financing banks, etc. And of course I would like to see Christian Lanngs response to being called einvoicing, when his whole mantra is platform as a service.
Finally the general purpose vertical where Ariba and Basware are shown. Personally I am not sure what that means in terms of finance, but Basware has built a model around pcards, dynamic discounting and non approved invoice finance with Arrowgrass Capital. Ariba and supply chain finance has been the enigma for many years, but with the Discover relationship brings both security aspects around payment, bank account verification, and remittance details and of course Discover Bank that can help with finance solutions.
Perhaps its definition, perhaps its a sheer rush to cover this space, but the state of supply chain finance is entering a new era of maturity. For that reason, it needs to be better defined upfront or else we get into the old parable about the blind men feeling the elephant - you are talking tail, I am talking trunk and our colleagues are talking toe, skin, etc.
I am trying to help with this confusing world and I get that in the rush to produce content, we can get confused. So therefore I have begun this journey with theAlternative Business Finance Index to help the market better understand this complex space. You see, even McKinsey can get confused!
How so? Well it gets back to the fact that everyone is racing to cover all thing fintech as it relates transactional finance and doesn’t fundamentally understand the different business models. So companies get lumped together that should not be. And this confuses the market and it ultimately confuses buyers.
I will give you an example in the piece. The graph below talks about Fintechs offering solutions across the Procure to Pay cycle.
You can see companies like PrimeRevenue and Orbian are thrown into the same sandbox as Demica and Taulia. While Demica has a supply chain software product called Citadel, Demica licenses software to the banks to run supply chain finance. With their new owners (recently bought by investment bankers JRJ Group, TomsCapital and 76 West Holdings) they are moving to a non bank funding model that competes with banks. Taulia is an einvoicing vendor that has been a marketing genius at creating a financial supply chain company out of their dynamic discounting offering and relationship with Greensill Capital. But both PrimeRevenue and Orbian have been creating large corporate assets out of approved invoices for bank and non bank consumption for a long time for very large suppliers.
The next horizontal is even more interesting with TradeCard and Tradeshift. How those two got together I’ll never know. First TradeCard was acquired by GT Nexus which recently was acquired by Infor. Second TradeCard would never describe themselves as an einvoicng platform but brands themselves as a supply chain collaboration platform. Their platform enables companies to run Direct Sourcing and Import programs through a cloud-based platform connecting forwarders, suppliers, large Corporate buyers, financing banks, etc. And of course I would like to see Christian Lanngs response to being called einvoicing, when his whole mantra is platform as a service.
Finally the general purpose vertical where Ariba and Basware are shown. Personally I am not sure what that means in terms of finance, but Basware has built a model around pcards, dynamic discounting and non approved invoice finance with Arrowgrass Capital. Ariba and supply chain finance has been the enigma for many years, but with the Discover relationship brings both security aspects around payment, bank account verification, and remittance details and of course Discover Bank that can help with finance solutions.
Perhaps its definition, perhaps its a sheer rush to cover this space, but the state of supply chain finance is entering a new era of maturity. For that reason, it needs to be better defined upfront or else we get into the old parable about the blind men feeling the elephant - you are talking tail, I am talking trunk and our colleagues are talking toe, skin, etc.
I am trying to help with this confusing world and I get that in the rush to produce content, we can get confused. So therefore I have begun this journey with theAlternative Business Finance Index to help the market better understand this complex space. You see, even McKinsey can get confused!
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