Insights
Why are you missing revenue targets in Supply Chain Finance?
Finverity Team
Key takeaways:
Banks are neglecting complicated smaller clients and failing to meet key client demands.
Technology enables banks to capture more clients and more markets, more easily.
Banks are not maximising the revenue potential of existing clients – and their suppliers.
Many banks are falling short of revenue targets in supply chain finance (SCF). We spoke to 300+ to find the reasons, and two stood out…
First, a lack of appropriate, flexible products – or tailored variants – make it challenging to meet the diverse needs of key potential clients. At the other end of the spectrum, smaller clients and counterparties are not worth the resources needed to onboard, finance and monitor.
We look at these two issues, challenge some of the underlying assumptions, and ask “how can you better serve new and existing clients to meet – even surpass – your revenue targets?”
Answers below…
Challenge #1: Key clients don’t like your offering
Without the appropriate product or variant to meet unique client requests, you’re unlikely to attract and retain key clients. This goes for clients in all sectors, from telecoms to logistics and retail, irrespective of jurisdiction.
Recent data from the Asian Development Bank shows that demand for customised SCF solutions among large companies has grown by over 30% in the past two years. A survey by EuroFinance found that 65% of multinational corporates are looking for SCF providers that can offer a broad range of customisable financing solutions.
Larger clients in particular need sophisticated SCF solutions to integrate with their existing systems and processes. Those who can’t provide bespoke solutions risk losing out to more agile competitors.
Excel-centric, outdated, fragmented systems won’t do in 2024, and yet they remain popular. The result is that many banks, particularly in the Middle East, Africa & CEE, are actively losing revenue and prestige as a result.
Digital SCF systems not only help maximise available revenue streams, but play a crucial role in enhancing a bank's ability to capture new revenue. Designed with flexibility in mind, they allow banks to create and deploy a wide range of financing solutions that meet the specific needs of both large and small clients.
From dynamic discounting to reverse factoring, the right technology unlocks a suite of products for clients of various sizes, with sufficient functionality to support various financial requirements. The best systems even allow you to create your own, unique products.
Challenge #2: Smaller clients aren’t viable
Do smaller clients help you reach your revenue targets? After all, the cost of setting up and managing the financing outweighs the benefits – or does it?
While the cost of onboarding and administering these accounts has led banks to focus primarily on investment-grade clients, this approach means you’re likely missing out on the cumulative growth potential smaller clients represent.
One study by McKinsey & Company shows that the smaller business segment could represent as much as 20% of total supply chain financing volumes, but many banks capture less than 5% of this potential due to high operational costs and perceived risks.
The first step in capturing this smaller segment is digitising the onboarding process. Traditional methods are often cumbersome, but by implementing digital identity verification, electronic documentation, and automated compliance checks, banks can streamline onboarding.
Automation can reduce the cost of processing invoices by up to 70%, according to a report by Deloitte.
Efficient transaction management, including asset collection and financing is crucial. Digital platforms automate these processes, providing transparency and security, while real-time monitoring and management of transactions reduces the risk of defaults and ensures timely payment.
By automating key processes such as KYC collection/onboarding, funding disbursal, and asset collection, SCF systems reduce the manual effort and operational overheads associated with managing numerous smaller accounts. In other words, they increase the opportunity for revenue.
Finally, reconciliation. Where manual reconciliation is prone to errors and delays, automated systems ensure faster, more accurate transaction matching and prompt discrepancy resolution.
All this means that banks can service smaller clients, and cost effectively, to unlock additional revenue.
What next for banks?
To more consistently meet and exceed revenue targets in SCF, banks need to address the dual challenge of maximising revenue from smaller clients and offering suitable products to key clients.
Digital SCF systems offer a strategic pathway to achieve these objectives, making smaller clients viable on the one hand, and making products more flexible on the other. Leveraging these technologies, banks expand their client base, improve client satisfaction, and ultimately, unlock new avenues for growth in a competitive SCF market.
How can FinverityOS help?
FinverityOS is your all-in-one system for open account trade finance & SCF.
Enhance and expand your offering with a single system to support all products and more clients.
Save time and minimise human error by digitising and automating manual, repetitive tasks.
Offer truly unique solutions. Build custom products, workflows and processes for you & your clients.
Introduce digital checks & balances to view, verify & validate every transaction.
