Supply chain financing structures - using payables-backed financing models, have been widely used by many financial institutions for a number of years. The way of delivering these trade solutions however is evolving, with the increasing importance of technology and web-based solutions, enabling processes to be streamlined, and processing times and operating costs reduced. These developments have enabled FIs to add further value to their client relationships.

Another market driver is the increasing focus on working capital management, where financial institutions are taking a greater role in helping clients to manage their supplier financing, and structure new solutions to include a wider range of their supply chain processes. For example, SWIFTNet FIN and FileAct are used by a number of the larger corporates to send payment instructions and receive transaction information, thereby improving cash flow visibility and liquidity management.

In parallel FIs are continuing to remove manual paper processing, replacing with web-based technologies and electronic documents to achieve greater levels of STP. FIs will continue to seek more from the web, as trade and payment products are commoditised, where focus is now being given to e-invoicing and automated documentation, liquidity and reconciliation services.

As corporates drive down their processing costs, being able to optimise their working capital with the convergence of the physical and financial supply chains is gaining momentum.  In response FIs are leveraging technology solutions and will seek to partner with logistics providers to enhance the visibility of the movement of goods. The benefits from this alignment of parties are reduced risks and costs, by linking the flow of funds and the cost of finance more closely to the physical goods, as well as ownership and location of goods. In turn providers are able to enhance transactional control and mitigate risk.

Capco's core competence in payments, cash management and trade services positions us well to understand both the challenges and opportunities of developing the financial supply chain requirements across business, operations and technology. We have worked with a number of leading FIs, helping to define the business requirements for both transaction processing and lending in the financial supply chain, as well as the technology strategies to support the delivery of client solutions.