Supply Chain Finance Business Higher on Asia-Pacific Banks’ Agendas

Wooden mannequins pushing puzzle pieces into the right placeAite Group recently conducted a survey in Thailand, Indonesia and Australia to gauge the current state of supply chain finance (SCF) adoption among banks operating in the Asia-Pacific region. It found that SCF business is now firmly on the agendas of Thai banks and is seen as a business generator for Indonesian banks. While it’s on the agendas of the Australian banks, technology isn’t perceived as offering the necessary support for SCF-related programs.

I asked Enrico Camerinelli, senior analyst in wholesale banking at Aite Group, why the Australian banks have that perception and exactly what they perceive as being the necessary support. He explained  that banks tend to look first at the products they can sell, and then at the enabling technologies to create the proper infrastructure. This is especially because enabling technologies (SCF enablers) usually don’t generate revenue for banks. Electronic invoicing, for instance, is an SCF enabling technology but banks typically can’t charge for it; it’s simply a cost of doing business. Not surprisingly, they’re reluctant to invest in a service they can’t subsidize, particularly in the current economic environment.

In countries where banks traditionally have assisted their local corporate clients in import-export trade-related business, SCF solutions are accompanied by other services that emphasize collaboration. Such services include supplier evaluation, supplier scoring, go-to-market support, lead generation, education on local practices and support in handling local administrative duties.

Interestingly, Aite Group’s study revealed that the domestic market conditions, economic dynamism and level of maturity in SCF awareness influence the decision to invest in SCF products versus services. When domestic market conditions show signs of growth, trends of economic dynamism are positive and the level of maturity in SCF awareness is high, banks should invest in SCF enablers/services. In the opposite conditions, banks should invest in SCF products.

One of the takeaways from Aite Group’s report is that software for SCF enablers is currently in demand from financial institutions in dynamic Asia-Pacific economies. As such, SCF software vendors have an opportunity to supply cash management, liquidity management and trade finance applications for building multibank collaborative platforms. These platforms allow corporate treasurers to have total visibility of cash positions and liquidity pools across all bank accounts. Additionally, they can exchange electronic invoices in any format, as well as issue payments from any bank account and in any format.

Aite Group’s new report is entitled Supply Chain Finance in the Asia-Pacific.