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?

DAVIDGUSTIN,ChiefStrategyOfficer,TheInterfaceFinancialGroup April,:AM| Fundinghasgrownmoresophisticatedwithsupplychainfinanceprogramstolargecompanies,drivingmarginsdowninmanycases.Thereareseveralinterestingissuesaroundpricing:Platformprovidersmakemoneyontransactionsnotexplicitchargesfortheirsales,marketingandonboardingefforts.Howareplatformcostsembeddedinpricing?Whataboutthirdpartyplatforms?Managedservices?IfSyndicationmodelsarebeingusedtocreatemorecapacityforbuyers,howdoesthatmodelimpactpricing?Forexample,thewaymanylargebankoriginatorsmakemoneyisbydistributingmostprogramstootherbanks. Iftheyhavea$bnoutstandingprogram–theymaykeep$mandsell$.billionwithadistributionmarginofbpsbetweenwhattheyoriginateandwhattheysell.Iftheyhavealeverageratioofor:,theycanmaketheirreturnmodelswork.Ifnewfundingplayersareparticipatinginthemarket,HedgeFunds,InsuranceCompanies,andEuropeanandAsianBanks,isthatmoneygoingtobethereifcreditcyclestakeaturnfortheworse?IsExpectedLossPricedAppropriatelyforSupplyChainFinance?Pricingtosuppliersisbeingpricedclosertothebuyerriskandthebuyer’sshorttermborrowing.FundingistypicallybenchmarkedoffofUSDorEuroPrimeorLiborandwillfluctuatemonthlybasedonincreasesordecreasesofthoseindexes. Isriskmispriced?Ifyoureallypriceriskyouputacapitallossonexpectedlossanditsapremiumtothattiedtoyourcostoffundingandoperationscost.IfabankbuysaAAAgovernmentbond,itscapitalcostiszero. U.S.treasuriesarenotreallyriskfreebutthatiswhathowtheyaretreatedfromaregulatorystandpoint. ForSCFprograms,thekeyquestionisiftheexpectedloss(“EL”)forthecontractforthatpartyisassessedproperly.  ExpectedLossistiedtothecovenantsoftheprogramaswell. YoucanlookatCreditDefaultSwapdataonthecounterpartiesasaproxy toEL,butCDSwasnotdesignedforthispurpose. Becauseoftightpricing,moresolutionsarebeingtargetedattheMiddleMarket(AIG PrimeRevenue asanexample).Butamiddlemarketcompanyof$Mondaytermswithsuppliers,andCOGSis$,evenifyougot every supplieronboarded,itsonly$Mprogram.That’sthechallengethere. SoarewepricingExpectedLossproperlyintheseprograms? Iwouldbeinterestedinhearingfromyou.

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?

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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,” […]