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Supply Chain Finance. Opportunities Unchained

Original research by Capco and University of St. Gallen, Switzerland

The physical supply chain has experienced a revolution, driven by exponential growth in global trading and the relentless rise of the emerging markets. Now, the time has come to look closely at the opportunities that supply chain finance represents – to corporate clients, to banks and to technology providers. This paper captures the responses, the trends and the major opportunities going forward. We also look at some key actions necessary for the financial supply chain, if it is going to fulfill the potential it offers to stakeholders.

The phenomenal growth of the physical supply chain is outpacing the adoption and implementation of new financial products, services and technology required to support it. We are now no longer 'ahead of the wave' in terms of solution availability and fitness for purpose. There are meaningful – and viable - SCF solution opportunities, not just for tier one global banks, but also for tier 2 and 3 as well as regional and specialist institutions. There are also opportunities for corporate clients with their own treasury departments, as well as for ‘multi-bank’ technology providers.

Our research key findings
On the service supply side there are considerable opportunities, not least for regional and specialist banks outside the Tier 1 arena. In addition to cross-selling products and services, these banks can increase customer retention by taking a ‘tailor made’ approach to the supply chain finance they offer to customers. The open account vehicle is growing in volume and popularity and has the potential to increase revenues. And there are new product development opportunities, such as reverse factoring.

Rigorous market analysis and segmentation will trigger an internal re-evaluation of the products, services and processes that banks offer and are planning to develop. Targeting clearly understood and differentiated client profiles will play a critical role in making product and service offers more relevant and more appealing. Businesses with their own treasury functions and high transaction volumes – the ‘large medium’ enterprises – will be particularly attractive.

Exploiting the new generation of SCF opportunities – strategic principles for banks

  • Consolidated position: for a bank, it is becoming increasingly important to secure the role of preferred supplier or 'house bank' to corporate clients.
  • Loyalty: clients are more loyal to their house bank. Moreover, if a bank is already serving a client with cash management, trade finance and a credit line, the client will not take the decision to switch to a competitor lightly.
  • Insight into Client’s Business: if you already have a ‘large piece of the SCF pie', it is easier to gain a fuller picture of a client’s trading status, profitability, opportunities for cross- and up-selling and any risks. It is also easier to respond to (and take appropriate action) developments because there is a shorter lead-time for them to become apparent.
  • Increased profitability: last but by no means least, it is more profitable to cross-sell entire, integrated solutions of bundled product and service packages than to rely on single product sales.

University of St. Gallen, Chair of Logistics ManagementTo learn more about the practical and operational implications of adapting to exploit the rapidly evolving world of SCF, download Capco’s detailed Point of View - Supply Chain Finance. Opportunities Unchained – which offers the following valuable insights:

  • Greater depth presentation of our original research with the University of St. Gallen
  • Detailed analysis of what ‘solutions’, ‘product bundles’ and an ‘integrated' approach’ to SCF really mean
  • Practical analysis of the next steps needed to exploit the opportunity to offer new and tailored SCF services that grow revenue on a cost-effective basis
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