Banks are starting to warm to the idea of automating supply chain finance to speed up payments that have traditionally been paper-based.
"You have to decide to cannibalize yourself or be cannibalized by someone else," said Kurt Cavano, founder, vice chairman and chief strategy officer at GT Nexus, a cloud-based supply chain platform provider.
GT Nexus merges the physical and financial supply chains, eliminating paper-based methods. Because all data is stored in the cloud, decisions about credit guarantees, purchase order finance and even the payment decision can happen in near-real time.
Within this model, banks take less in fees but generally make more in profit, Cavano said.
Nearly 30 financial institutions, including Citibank, Deutsche Bank and The Coface Group have partnered with GT Nexus. Cavano said financial institutions are incentivized to work with GT Nexus because if suppliers have been provided credit, the payments go directly to the financial institutions, eliminating collection risk. Plus the online platform allows financial institutions to see who has already been given credit and avoid double financing, which tends to be a problem in the developing world, he said. GT Nexus has vendors in more than 60 countries.
But that traction with financial institutions took time. Prior to joining TradeCard, which merged with GT Nexus in early 2013 to create the global supply chain platform, Cavano worked at American Management Systems (AMS), a software provider for banks. He had contacts with executives at 30 of the 50 top banks, and he went to them with the digital supply chain platform but none of them took to the idea.
But today, e-invoicing is on the rise. In the government and business segment, the annual bill and invoice volume is estimated at 170 billion worldwide. In 2014, the proportion of total volume initiated through electronic means exceeded 8%, according to Billentis, an electronic invoicing and billing provider.
Year over year, GT Nexus is growing between 15% and 20%, Cavano said, and it is now expanding into Europe.
Europe's move to e-invoicing shows significant uptake as well. Total annual volume is estimated around 17 billion for government and business. From that, 24% was handled electronically in 2014, according to Billentis.
Today GT Nexus is processing more than $25 billion in payments through the platform, 30% of which have some type of financing attached, said Cavano.