Treasury and Payments
How Strategic Alliances are Reshaping Supply Chain Finance Solutions
Taulia hosted the Working Capital and Supply Chain Finance Lab at Eurofinance’s virtual event ‘International Treasury Management Week’ featuring a session on the Power of Partnership.
The discussion began with an exploration as to why a supply chain finance (SCF) partnership made sense, during which Anita Bubna, Sr. Director, Treasury at Flex, shared her experience of building an SCF program.
“The challenge we faced was that because Flex was so large and with so many legal entities, onboarding was very complicated from a KYC perspective. Not only did our banking partner request wet signatures for each entity, but they also didn’t have a unified system for us to work with. So then, we started looking at fintechs. They managed to solve the issues we were experiencing and made the onboarding experience spectacular. However, on the flip side, as the banks were trusted institutions, when we approached suppliers with a bank SCF program, it was an easy switch for them because they had existing relationships with the banks. The best solution was to work together with banks and fintechs in a complementary way to get the best of both worlds. That’s why I think the partnership made the most sense.”
After outlining the rationale for corporates partnering with both fintechs and banks, the panel discussed the core components of a best-in-class SCF solution, including technology, analytics and supplier onboarding. Panelists stressed the importance of having:
Panelists also discussed why the non-tech elements of an SCF solution should not be overlooked and pointed out that the people behind the service are crucial. Having dedicated teams to drive customer success, supplier onboarding, outreach and accessible support services for users were some of the other critical elements required to have a truly best-in-class SCF solution.
The panel was then asked to shed light on the drivers for the alliance between J.P. Morgan and Taulia.
Soraya Ahmed, EMEA Trade Head at J.P. Morgan commented, “For us it was always about the client. We entered a strategic alliance with Taulia as we sought the best supply chain finance provider, enabling us to deliver the best-in-class, bank agnostic supply chain finance structure, solution and platform to our clients and their suppliers. It's a cornerstone of our ambitions and strategy to be a leading provider of working capital finance solutions across procurement, inventory and sales. The strategic alliance brings not only liquidity via early payment, but ultimately, much faster access, agility and an accurate means of cash forecasting, reconciliation and data analytics. The provision of liquidity to the entire supplier base is also key for us. That’s achieved by rapid onboarding with Taulia.”
Soraya Ahmed, EMEA Trade Head at J.P. Morgan
Jasmine Stephenson, Senior Business Consultant at Taulia commented, “The strategic alliance offers a best-in-class SCF solution. It’s scalable, flexible and offers rapid onboarding of suppliers. Marrying Taulia’s robust technology and J.P. Morgan’s stability, funding scale and client connectivity was a big driver for our alliance – J.P. Morgan customers not familiar with Taulia, can have comfort in knowing their relationship bank trusts us.”
With the pandemic serving as the backdrop for this year’s event, panelists were asked to share their thoughts on a possible expansion of SCF in markets, given the need for liquidity in supply chains. With all in agreement, it was a resounding yes. Citing our global COVID-19 supplier survey Jasmine shared, “62% of the respondents said they wanted early payments. This is up from 54% in previous periods. With the uncertainty of when COVID-19 and its aftermath will end, we only anticipate this demand to increase. We had a supplier very recently state to us that ‘Cash isn’t just king, it's oxygen’ so that speaks volumes to me for what this access means to suppliers.”
Jasmine Stephenson, Senior Business Consultant at Taulia
Anita also added, “With the onset of the pandemic, we saw two things happen. The rates for short-term funding shot up, and access dried up. This challenge was a hurdle for our small suppliers especially and presented an added risk to our supply chain. In this environment, it has been great to be able to oer supply chain finance as a tool for our suppliers, and we have seen a lot of uptake during.”
Soraya agreed adding, “I think there will, and continues to be, increased use of supply chain finance. We see it across the region and across all industries. I think buyers are also looking at this as a means of supporting suppliers, particularly in the small and medium enterprise space, and protecting their supply chains.”
Panelists also commented on there being a need for business process automation. With less people in the oce, it was felt that sending and processing invoices the traditional way could be a thing of the past and electronic invoicing the new normal.
To expand further on the power of partnership, now and in the future, panelists were asked to comment on whether fintechs and banks can continue to innovate together to develop new solutions. It was clear that the appetite for collaboration is ever present and growing, not just between banks and fintechs, but also clients too. Jasmine discussed how Taulia was born out of identifying a gap and using innovation to fill the need. “We recognized a need for funding the long tail because smaller businesses are the ones who suer the most, and in 2009, that’s how our Dynamic Discounting product came to play. I only expect us to continue doing this with our banking partners. I think it’s also fair to say that the old school notion that banks and fintechs are pitched against each other is no longer the case and we will continue to work with J.P. Morgan to identify the gaps, further enhance existing tools and create additional solutions that meet the needs of our current customers and future ones.”
When asked to share advice on lessons learned from implementing a supply chain finance program panelists shared the following insights for treasurers to bear in mind:
- Consider your provider’s track record for onboarding - faster onboarding will generate real momentum, early internal buy-in and program success
- Be ambitious and consider scalable programs - the scale will deliver the real value to your full supplier base, but also internally to your procurement and treasury partners
- Consider early payment as an elegant and simple way to achieve yield enhancement. It can be a great extension of your liquidity and cash management strategy
- Design sustainable programs for the medium and long-term to meet the needs of your suppliers today and drive that capital across your relationship banks and third-party providers. Especially as the trade finance asset class continues to grow in interest for banks and other institutional investors
- Ensure teams with supplier-relationship remits (e.g. Procurement, AP, Legal) are given notice about the initiative and get their buy-in to support the program
- Buyers should mandate account registration; we call it a Portal Use Policy. Suppliers who say they do not want early payments, but have activated their accounts, will benefit from the visibility should their directive change later, which is often the case
- Don’t limit the scope of the program and let your provider have access to your full suite of suppliers so they can apply their best practices and industry knowledge to determine your program’s potential outcomes
- If you can utilize other services like electronic invoicing, this is certainly a good way to get suppliers hooked into using business automation
- Ensure executive alignment - the organization needs to really come together to agree on a collective set of objectives for the program and allocate the necessary resources to make it a success
- Put in place a robust communication strategy so that your suppliers can evaluate the value of the program
- Find a funding partner that matches your geographic footprint to support the currencies that fit your business model
Learn more about the alliance with J.P. Morgan and Taulia.
This material was prepared exclusively for the benefit and internal use of the JPMC client or prospect to whom it is directly addressed (including such entity’s subsidiaries, the “Company”) in order to assist the Company in evaluating a possible transaction(s) and does not carry any right of disclosure to any other party. In preparing these materials, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. This material is for discussion purposes only and is incomplete without reference to the other briefings provided by JPMC. Neither this material nor any of its contents may be disclosed or used for any other purpose without the prior written consent of JPMC.
J.P.Morgan, JPMorgan, JPMorgan Chase, Chase and InstaMed are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “JPMC”). Products or services may be marketed and/or provided by commercial banks such as JPMorgan Chase Bank, N.A., securities or other non-banking aliates or other JPMC entities. JPMC contact persons may be employees or ocers of any of the foregoing entities and the terms “J.P.Morgan”, “JPMorgan”, “JPMorgan Chase” “Chase” and “InstaMed” if and as used herein include as applicable all such employees or ocers and/or entities irrespective of marketing name(s) used. Nothing in this material is a solicitation by JPMC of any product or service which would be unlawful under applicable laws or regulations.
Investments or strategies discussed herein may not be suitable for all investors. Neither JPMC nor any of its directors, ocers, employees or agents shall incur in any responsibility or liability whatsoever to the Company or any other party with respect to the contents of any matters referred herein, or discussed as a result of, this material. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice or investment recommendations. Please consult your own tax, legal, accounting or investment advisor concerning such matters.
Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by JPMC and or its aliates/subsidiaries. This material does not constitute a commitment by any JPMC entity to extend or arrange credit or to provide any other products or services and JPMC reserves the right to withdraw at any time. All services are subject to applicable laws, regulations, and applicable approvals and notifications. The Company should examine the specific restrictions and limitations under the laws of its own jurisdiction that may be applicable to the Company due to its nature or to the products and services referred herein.
Notwithstanding anything to the contrary, the statements in this material are not intended to be legally binding. Any products, services, terms or other matters described herein (other than in respect of confidentiality) are subject to the terms of separate legally binding documentation and/or are subject to change without notice.
Changes to Interbank Oered Rates (IBORs) and other benchmark rates: Certain interest rate benchmarks are, or may in the future become, subject to ongoing international, national and other regulatory guidance, reform and proposals for reform. For more information, please consult: https://www.jpmorgan.com/global/disclosures/interbank_offered_rates
JPMorgan Chase Bank, N.A. Member FDIC.
JPMorgan Chase Bank, N.A., organized under the laws of U.S.A. with limited liability.
© 2020 JPMorgan Chase & Co. All Rights Reserved.