Fintech collaborations focus on fixing pandemic-struck supply chains
The coronavirus dealt a double blow to procurement, cutting off both goods and money. Banks and e-commerce firms are relying on partnerships to tweak payment tools to rescue the market.
In the past few days, MSTS and Alibaba.com have collaborated to embed trade financing on a cross-border e-commerce site; meanwhile BNP Paribas entered a deal with Coupa to offer a virtual card to improve visibility for supply chain billing and payments.
These deployments reveal more attention on B2B payments than in the past, placing supply chain transactions on par with consumer payments innovation after years of lagging behind.
MSTS clients, the sellers, offer 30- or 60-day terms to buyers. Alibaba.com provides an international supplier network, B2B payments via its e-commerce platform and ancillary merchant services such as digital trade shows. Alibaba.com and affiliates such as Ant and its Alipay wallet are best known for their huge e-commerce market in China, and Alipay’s success over the past few years in building an international network by enabling Chinese consumers to pay retailers in their own currency when outside China.
This has given Alibaba.com the ability to manage currency exchange, one of the factors that can complicate international supply chains. It’s a major point of competition among fintech firms, particularly those that use blockchain technology to eliminate the third parties that slow cross-border payments and extract fees for managing currency conversion.
Alibaba.com has moved into supply chain payments for businesses more recently. A 2019 deal with Office Depot provided Alibaba.com access to 10 million business customers while providing U.S. small businesses access to more than 150,000 suppliers in Alibaba.com’s global network.
International suppliers usually require more than half of a payment upfront, exposing the buyer to working capital shortfalls, said Brandon Spear, president of MSTS.
“A huge piece of this is fixing the effect that [each] transaction has on capital,” Spear said. “With the broader world of the pandemic and the impact that has on small to midsize businesses, this is one of the tools that could be a pathway back to normalcy.”
Allen Bonde, vice president and research director serving application development and delivery professionals at Forrester Research, said he’s tracing about 400 niche marketplaces for small-business supplies, and is noticing a shift to online marketplaces for procurement as businesses streamline operations to improve visibility into cash positions.
“It’s not a new idea — Dell had a marketplace like this 20 years ago — but it’s a channel that’s more relevant than ever,” Bonde said.
Alibaba.com’s scale can also provide a competitive response to Amazon’s buy now pay later program for businesses. “MSTS allows Alibaba.com to have similar capabilities to Amazon,” Bonde said.
The supply chain woes that have accompanied the coronavirus shutdowns have become a major opportunity for financial technology firms and banks contending they can either bolster working capital or improve payment terms and cash positions.
Crowdz, for example, recently collaborated with Barclays, one of its investors, to build InvoiceXchange to connect businesses, replace PDF invoices with digital versions and perform other processing functions such as reconciliation.
BNP Paribas’ integration with Coupa Pay powers a virtual card that the bank's business clients can automatically send to suppliers.
That will automate invoice matching, reconciliation and tracking, which by design would allow buyers to negotiate terms or gain more visibility.
These partnerships are betting the reluctance of businesses to shed paper, such as invoices, is melting away due to financial stress. The accounts receivable departments at many businesses have been displaced from offices, creating an additional need to automate payment processing.
“There are a lot of initiatives that are about removing friction from buying and selling,” Bonde said.