Banks increasing Supply Chain Finance commitment

Posted on 3 Apr 2014 by The Manufacturer

The importance of Supply Chain Finance as a line of business has increased in recognition from the European banking community, according to a new study.

The report published by technology specialist Demica shows 45 percent of European banks have created SCF-specific job roles and titles, while close to one third of banks have SCF-specific roles with directorial status.

Nearly one fifth of these banks have sales functions specifically related to SCF and 16 percent have SCF-specific product managers, with banks regarding SCF as a standalone product in its own right.

Phillip Kerle, chief executive officer of Demica, said with the heightened interest in SCF in recent years, the SCF credit facility has become an increasingly significant business avenue for banks.

“Especially in a post-crisis world where a return to cheap liquidity is unlikely in view of the stringent regulatory requirements, the value of SCF will continue to grow for buyers and suppliers alike,” he said.

Mr Kerle added that financial institutions recognising the business potential behind SCF are now enhancing their commitment to developing this business area.

“Given that SCF is still establishing itself as a universal and standard banking offering, those that manage to gain a foothold in this arena can seek to benefit from the considerable potential that is yet to be exploited,” he said.

“By helping client organisations integrate physical supply chain processes with the financial supply chain, banks will not only seize new business opportunities, but also help companies transform their supply chains into a true competitive advantage.”

The study also highlights numerous driving forces behind banks stepping up efforts to develop SCF, as trade business increasingly takes place via open accounts instead of letters of credit.

This means banks have to be able to offer product solutions that not only accommodate the evolving trading dynamics, but also facilitate trade development.