How Fintechs Can Use Non-Banks for Supply Chain Finance

Fintech

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group February 12, 2019 In my last post, “Many Fintechs Still Rely on ‘Bring Your Own Bank’ Strategy” for Supply Chain Finance, I discussed how source-to-pay platforms and other cloud software providers still rely on their clients’ house banks for supply chain finance and why that might […]

Has Off-Platform Lending’s Time Finally Arrived?

off_platform_lending

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group January 15, 2019     “You would rather have the cash than borrow against it.No one says I would like a lot of inventory so I can borrowagainst it.” — CFO in farming and mining machinery       More companies are required to use supplier […]

Addressing S2P Platform Misconceptions Around Early Pay Programs

Misconceptions Around Early Pay Programs

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group February 27, 2019 David Gustin is the chief strategy officer for The Interface Financial Group responsible for digital supply chain finance and is a contributing author to Trade Financing Matters. Few source-to-pay platforms, payment processors or other networks have been able to develop early pay dynamic […]

Pricing Power and Playing with Payment Terms

Pricing Power and Playing with Payment Terms

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group March 12, 2019   David Gustin is the chief strategy officer for The Interface Financial Group responsible for digital supply chain finance and is a contributing author to Trade Financing Matters.     “When an inflation regime shifts, there’s only one question that really matters for […]

Why Corporates Can’t Fund Early Pay Programs (Dynamic Discounting + SCF)

corproate_early_payment_solutions

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group March 19, 2019       We hear so much about how flush American companies are with cash. Pundits are out there talking about how much cash corporate America has. But this story is highly misleading. If you look at the graph below, 5% of S&P […]

Why Payment Companies are Missing an Opportunity with Early Pay (Part 2)

Why Payment Companies are Missing an Opportunity with Early Pay

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group April 9, 2019 As we pointed out in our last post, payment companies are looking to convert paper checks to cards, and this is drawing interest from many firms, from private equity investing into payment companies to acquisitions (e.g., Fleetcor acquiring Nvoicepay, Visa buying Earthport). The […]

Is Supply Chain Finance Pricing Mispriced?

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group  April 5, 2016 2:38 AM |   Funding has grown more sophisticated with supply chain finance programs to large companies, driving margins down in many cases. There are several interesting issues around pricing: Platform providers make money on transactions not explicit charges for their sales, marketing and onboarding efforts. How are platform costs embedded in pricing? What about third party platforms? Managed services? If Syndication models are being used to create more capacity for buyers, how does that model impact pricing? For example, the way many large bank originators make money is by distributing most programs to other banks.  If they have a $3bn outstanding program – they may keep $400m and sell $2.6 billion with a distribution margin of 25bps between what they originate and what they sell. If they have a leverage ratio of 5 or 6:1, they can make their return models work. If new funding players are participating in the market, Hedge Funds, Insurance Companies, and European and Asian Banks, is that money going to be there if credit cycles take a turn for the worse? Is Expected Loss Priced Appropriately for Supply Chain Finance? Pricing to suppliers is being priced closer to the buyer risk and the buyer’s short term borrowing. Funding is typically benchmarked off of USD or Euro Prime or Libor and will fluctuate monthly based on increases or decreases of those indexes.   Is risk mispriced? If you really price risk you put a capital loss on expected loss and its a premium to that tied to your cost of funding and operations cost. If a bank buys a AAA government bond, its capital cost is zero.  U.S. treasuries are not really risk free but that is what how they are treated from a regulatory standpoint.   For SCF programs, the key question is if the expected loss (“EL”) for the contract for that party is assessed properly.   Expected Loss is tied to the covenants of the program as well.  You can look at Credit Default Swap data on the counterparties as a proxy  to EL, but CDS was not designed for this purpose.   Because of tight pricing, more solutions are being targeted at the Middle Market (AIG-PrimeRevenue as an example). But a middle market company of $500M on 90 day terms with suppliers, and COGS is $400, even if you got every supplier onboarded, its only $100 M program. That’s the challenge there.   So are we pricing Expected Loss properly in these programs?  I would be interested in hearing from you.

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group April 5, 2016   Funding has grown more sophisticated with supply chain finance programs to large companies, driving margins down in many cases. There are several interesting issues around pricing: Platform providers make money on transactions not explicit charges for their sales, marketing and onboarding efforts. […]

Is There a Tech Solution for Supplier Portal Proliferation?

tech solution

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group May 14, 2019  When we look at source-to-pay solutions, we tend to look at it from one side, that is, how this is going to improve the accounts payable department, reduce cost, be more efficient and improve supplier collaboration. But then I hear quotes like this […]

PPC: On Late Payment — Regulate, Shame or Just Deal with It?

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group May 21, 2019 There was some recent shaming of some very large companies by the UK government that did not comply with the Prompt Payment Code (PPC). Seventeen large companies, including heavyweights such as Vodafone, Rolls Royce, SSE and British Sugar, were suspended pending promises to […]

Blockchain and Digital Invoice Finance — What’s Missing?

blockchain

DAVID GUSTIN, Chief Strategy Officer, The Interface Financial Group July 2, 2019 What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient … highly contagious. Once an idea has taken hold of the brain it’s almost impossible to eradicate. — “Inception” (2010) Similar to an idea in the movie “Inception,” […]