FinTech in Supply Chain Finance: Geographical analysis
Fintech plays an instrumental role in the development of supply chain, a sector responsible for the manufacturing and logistics of goods and services ranging from a local to a global scale. The integration of financial supply chains allowed companies and countries to better control their financial operations as buyers are now able to manage their purchases and payments faster and safer than ever before. Suppliers, on the other side, receive the required funds as soon as the order is placed and can effectively distribute their products around the world.
The current market for supply chain finance around the globe is around 275 bn dollars, and its growth potential is impressive. The Organization for Economic Trade and Development (OETD) forecasts that annual trading volume could reach 1.3tn in the next few years, with 600bn in Europe alone. Nonetheless, the supply chain financial markets vary a lot in terms of size, scope, dynamicity and openness to new and innovative ideas. North America is a very mature but innovative market that created a perfect environment for the rise of multi-billion-dollar Fintech firms. US supply chain finance market is indeed the most dynamic fintech sector.
Europe is characterized by fierce competition among several medium-size banks involved in supply chain finance much more than what we see with their American counterparts. The European leader in the fintech supply chain industry is the English company Greensill (3.2 bn) providing working capital to over 10mln customers worldwide and early payments to their suppliers, located in 175 different countries. Far from being the only one, Greensil shares the EU fintech supply chain market with smaller but growing company like the German SAP Ariba. Despite the high degree of competitiveness, worthwhile opportunities may still be found as the market is constantly evolving following the introduction of innovative practices like dynamic discounting and account receivables sales coming from North America.
The South American supply chain market is primitive and its rapid growth is prevented by the great heterogeneity of the continent and the low level of regional integration. However, its immense potential is being developed by daughter companies of the well-known foreign giants operating on the continent like Coca-Cola, Ford and Pfizer. All these companies have established deep relations with local suppliers and are striving towards finding new ways of making their supply chains more efficient. Quick and reliable transactions with suppliers are critical for these companies, which explains their greater reliance on supply chain fintech technologies. These companies have therefore created the first embryo of a South American Fintech market, which is certainly growing but with a long way to go.
The Asia-Pacific area is then one of special interest for Supply Chain Finance and by no coincidence is also the one that experienced the fastest growth of Fintech supply chain services. This region established itself as “the factory of the world” following many companies worldwide relying on Asian suppliers for various components or semi-finished products.
Moreover, the competition between Chinese mega FinTech companies operating in this sector is likely to increase due to the antitrust campaign launched by the CCP. This turbulence may offer a great opportunity for Japan’s small but dynamic fintech industry.
The number of countries and companies acknowledging the importance of integrating Fintech within their supply chains is growing exponentially. This prominent sector owes its success to its abilities to increase customer satisfaction, reduce operating costs and enhance the speed and security of the billions of transactions occurring on a daily basis. Its economical and geographical importance is further highlighted by the heavy reliance countries place upon supply chains to navigate the COVID-19 outbreak, which has proven the immense potential that Fintech within supply chain has yet to reveal.
Denis Tonev - Financial Analyst - Bocconi Students Capital Partners | LinkedIn
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