Insights
Why banks should focus on Supply Chain Finance in 2025: liquidity retention
Ahanna Anaba
Key takeaways:
SCF turns outflows into retained assets & strengthens client relationships
SCF delivers insights to help you create tailored, competitive offerings
Digital SCF streamlines operations to drive growth & deepen ties with clients
Liquidity outflows and diminishing client loyalty
There is one critical question echoing across strategy sessions this quarter: “How do we retain liquidity and reduce outflows next year?”
Heading into 2025, the stakes couldn’t be higher. Cash flows are shifting unpredictably, competitive pressures are intensifying, and client loyalty can no longer be assumed. Funds flowing out to competitors as clients make routine supplier payments are costing traditional banks billions in annual liquidity and deposit retention opportunities.
But the outdated and ineffective method of relationship managers chasing clients once funds have left the ecosystem reflects a much deeper issue: banks are not sufficiently embedded in their clients’ operations.
Could Supply Chain Finance (SCF) help resolve this issue?
Why outflows are more than a deposit problem
For corporate clients, outgoing cash flows – especially supplier payments – are business as usual. But for banks, this creates a liquidity problem.
The frequency of these outflows, often on 30, 60, or 90-day terms, means banks lose sight of funds just as quickly as they see them. In the absence of suitable value chain products, corporate clients inevitably turn to your competitors. They may even use your overdraft or credit facilities to meet obligations with other financial institutions, effectively using your liquidity to finance your competitors.
If they continue to discount all their receivables or settle all supplier payments outside of your ecosystem, you will struggle to retain deposits and liquidity.
In today’s landscape, traditional lending and deposit relationships are no longer enough to guarantee customer loyalty. Simply adjusting your cost of funding doesn’t address the core problem: clients are finding solutions elsewhere.
It’s no coincidence that leading trade banks offer SCF products across all growth markets.
Smaller competitors are creating ecosystems around suppliers, capturing supplier payments and eroding your share of the wallet. At the same time, digital marketplaces and fintechs are disrupting traditional banking by offering embedded, client-centric solutions that integrate seamlessly into your client’s supply chain. Both parties are making themselves indispensable to corporate operations by simply making supplier payments frictionless.
The question every executive should be asking is “How much longer can we afford to let liquidity and valuable client relationships slip away to competitors – and what are we doing to reclaim them?”
The opportunity: proactive liquidity retention with SCF
Liquidity is the lifeblood of any bank, yet cash flow continuity suffers as client relationships grow more complex. SCF changes the equation by giving banks the ability to convert outgoing payments into retained assets.
< Read: What is Supply Chain Finance? >
Solutions such as reverse factoring and distributor finance ensure that every stage of the cash flow cycle benefits the bank, and funds remain within the bank’s network.
Reverse Factoring (Payables Finance): Facilitates early supplier payments for corporate clients. These suppliers can be paid directly into accounts domiciled within the bank, retaining liquidity while simplifying cash flow management and reducing transaction charges for the client.
Distributor Finance (Receivables Finance): Extends these benefits downstream, facilitating payments from clients’ distributors or retailers, creating a closed-loop system with deposit retention opportunities. This transforms one-off transactions into predictable, continuous revenue streams.
With SCF, banks manage cash flow proactively, not reactively. This does more than simply retain liquidity, it solidifies customer loyalty by placing the bank at the centre of your client’s financial activities. It creates value for both the bank and the client at every interaction point, capturing the true essence of transaction banking.
SCF also opens doors to new, high-value client relationships, as the demand for SCF continues to soar among key stakeholders with large value chains. By offering solutions that extend beyond traditional lending, you position yourself as a central player in the client’s long-term growth and financial success.
The data advantage of SCF
Beyond liquidity retention, SCF delivers a powerful strategic advantage: data.
Each transaction brings valuable insights into client behaviour, payment patterns, and supply chain dynamics. More than just numbers, data enables the bank to:
Refine product offerings
Validate and enhance risk management frameworks
Stay ahead of competitors with proprietary intelligence
Some of the data needed for a robust SCF strategy already exists within a bank’s fragmented systems. But without digitisation, this information remains largely inaccessible, even with an army of analysts: a resource-intensive approach that few banks can justify or afford.
A digital SCF offering reduces the friction that stops SCF facilities from scaling and causes clients to look elsewhere for transaction banking services. This “stickiness” builds real loyalty and creates lasting, value-driven relationships.
Digitisation unlocks more than scale. It transforms traditional value chain products into data-rich, customer-centric offerings that benefit banks and clients. Clients benefit from intuitive tools to manage invoices, track payments, and oversee financing, while banks gain operational efficiency and deeper engagement. This directly contributes to key metrics such as higher utilisation rates, increased interest revenue and growth in transaction fees.
In short, a digitised SCF offering improves client lifetime value and solidifies the bank’s competitive position in the long-term. It keeps the clients, the client data and the funds exactly where you want them, inside the bank.
Next steps: building a winning SCF strategy for 2025
SCF offers a way to reframe the cash outflow challenges of previous years into a strategic opportunity. For first movers and proactive transaction banking teams, each transaction becomes an opportunity to create value, drive growth, build liquidity resilience, and deepen customer relationships.
As global demand for SCF grows, so does the urgency to address the increasing cash leakage crisis. Because the truth is simple: your bank is currently funding your competitors.
By allowing client payments to flow into competing banks, you are not only supporting their liquidity management strategies but missing your own targets and offering competitors your key client relationships.
To stay ahead in 2025, banks must act decisively. Here's how:
Assess existing client relationships: Identify gaps where liquidity outflows occur.
Develop a simple and scalable SCF strategy:
Educate and incentivise teams: Equip relationship managers with the tools and insights to position SCF as a value-added service.
Digitise SCF operations: Remove friction with scalable platforms that enhance efficiency, improve user experience, and meet client expectations.
Leverage data for tailored offerings: Use transaction insights to create tailored offerings that strengthen client loyalty and outperform competitors.
At Finverity, we believe in the power of technology to connect financial institutions with every player in the supply chain. “Finverity” means “financial truth”, a commitment to delivering clear, data-driven, and client-centric solutions that unlock real and scalable value for banks and their clients.
By seamlessly providing your clients with real value, client loyalty and liquidity could very well become your bank’s strongest assets.
As 2025 approaches, the question is simple: Will you be among the leaders turning outflows into opportunities? Or will you continue funding your competitors and managing burnout relationship managers who keep missing targets?
