Supply chain challenges mean payments industry changes

A global pandemic and war in Europe haven’t just caused inflation to rise.

Supply chain challenges mean changes

They’ve also led to interruptions in global supply chains, whether that’s Ukrainian wheat not being shipped to Africa or parts for finished goods failing to arrive in Europe.

Shortages in certain commodities – from cement to lumber and metals – have further exacerbated the situation as new middle classes in India, China and elsewhere increase demand for quality housing.

For many businesses, managing logistics and operations—such as inventory storage, distribution and order fulfilment—is a source of complexity and cost.

These challenges have only been amplified in recent years as constrained supply chains caused global inventory backups and fulfilment challenges.

“Competition is increasing between buyers to build trust with sellers.”

These conditions have increased competition between buyers to be seen as trusted partners for sellers in commodities markets – and trade finance is changing as a result.

At one level, new apps are speeding up the transfer of funds and improving the traceability of shipments – but as competition continues to increase, sellers are demanding more.

Stephen Carter, Director of Product Marketing at iValua, says that some suppliers are now looking for 30 percent payment on order to secure delivery.

Depending on the size of order and contract timing, this can be a challenging proposition for SMEs that have to manage their cashflow carefully.

The benefits of being able to provide this level of payment up front, however, can be considerable: buyers can use higher pre-payments to secure early delivery of goods, as well as negotiating better prices.

iValua’s platform enables SMEs to manage all of their supplier payments and invoicing on one platform – including payments to so-called “gig economy” workers.

The company says their platform is now being used to manage more than $500 billion of spend world-wide, evidence of the growing popularity of faster payments not just with individuals, but with corporations also.

PCM SAYS:

In some ways, the arrival of B2B-only payments platforms distinct from traditional banking relationships is no surprise given rising dissatisfaction among corporate clients with the somewhat “vanilla” offerings of banks.

Many corporates (to say nothing of consumers and SMEs) are also tiring of “transaction plus five days” settlement arrangements offered by traditional banks and seeking alternatives.

However, a deeper trend is evident, which is the challenge of accessing liquidity for SMEs and, more plainly, the need to be paid on time if not sooner.

With both companies and freelance workers looking for more rapid access to funds, the way appears open for faster cross-border payments – whether via blockchain or on traditional rails.

That said, AML and KYC routines are going to have to speed up to make such faster payments a reality.

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