All readers are impacted by the current situation in one way, shape or form; some are impacted more severely than others depending upon the industry vertical, relative company size, and geographic scope. This is an unprecedented set of circumstances with unpredictable outcomes, and the short term harsh economic effects are already starting to pile up.
In any crisis placing strains on corporate liquidity, typically the first to feel the effects are smaller businesses, which have less accumulated company wealth (capital) than larger organizations, and the greatest need for immediate cash flow (keeping in mind vertical industry variations). This brief article appearing in PaymentsSource is an example of how some institutions and fintechs are trying to ease the rampant pain in supply chains by making cross-border payments an easier and faster task:
‘Goldman Sachs and SAP have agreed to pair the bank’s cross-border payments rail with Ariba, a B2B payments marketplace that’s a unit of SAP. Ariba’s network includes nearly 5 million companies, and it’s already partnered with banks such as Barclays to support virtual cards that can make payments earlier in the procurement cycle…By tying to Goldman Sachs, SAP hopes to enable local currency payment to suppliers. Much of the new technology that has entered supply chain finance in the past few years has used cloud computing or blockchain to remove time and fee-extracting third parties for international payments. A large part of that process is removing costs for correspondent banking.’
We just released a member research piece on this cross-border topic, and will soon be adding a report on access to liquidity for commercial trade. The growth in open account trade and availability of technology to both alleviate credit risk and facilitate faster payments that bolster supply chain efficiencies creates a need and opportunity, especially at this critical time. The piece goes on to discuss how many banks have launched supply chain finance initiatives and suggests that perhaps those with experience are best suited to helping businesses get back on track and stay ahead of the liquidity curve.
‘The coronavirus may favor bank-led cross-border supply chain initiatives over newer fintech startups or cloud-based firms, given the banks’ existing scale and their histories with prior economic downturns, which many challenger banks and newer fintechs do not have, said Sam Maule, U.S. managing partner for 11:FS, a digital financial services technology company…“This is really not a time for massive test cases to see how well things work,” Maule said. “Firms like SAP and Goldman are likely steady enough to ride this out.‘
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group