Temenos Opinion Piece
The continued after-effects of the recent financial crisis are forcing companies to re-evaluate how they manage their business and in turn expect more from their bank. Bank ratings are declining, government takeovers are increasing and new market players are emerging. The consequence is that customer confidence continues to decline. As a result supply chain finance solutions are becoming increasingly sophisticated and are proving to be essential in improving corporate liquidity.
Supply chain finance is the end-to-end sequence of financial processes that take place in a commercial transaction. They include the processes associated with the managing of that commercial transaction, ie. sourcing inventory (goods and services) and those that include customer service and retention processes as well as supplier management. It has long been understood that these processes are key to best practice working capital management.
Few realised that the credit crunch in 2008 and the cash crisis in 2012 would result in supply chain finance being so crucial to corporates and their corporate banks today. It’s importance, is because analysis of where cash is actually coming from and where it is going to and in particular the timing, the value and the accuracy of each cash transaction in each scenario, will determine whether or not an organisation is sustainable by way of cash in the future. However, the opportunity to extend this sophistication at the payment processing stage at bank level has been largely overlooked, until now.
While corporate banking systems have started to embrace supply chain finance solutions and acknowledge their importance, the payments market has also seen the arrival of a new generation of solutions. These systems, known as ‘payment hubs’ allow banks (and their customers) to benefit from a new unified and agile approach to payments. According to Andy Schmidt, at CEB Tower Group, a payments hub is ‘a construct that takes into account the capabilities, restrictions and requirements of a bank’s various payments systems in delivering a unified payments capability to end users, leveraging shared services to deliver common functionality across payments types.’ So how can these new types of payment system support corporates (and their banks) in increasing their efficiencies and cost savings?