John Bruggeman, CEO, Traxpay: "Supply Chain Finance + FinTech = New Era of Global B2B Commerce"

For a modern enterprise, whether it is embracing or adapting to trends in globalization, digitization, or what some call the ‘extended enterprise’, conducting business today requires managing an increasingly complex set of relationships within an ecosystem that has become global. And, while these relationships continue to grow in complexity, corporates are demanding more efficient financial supply chains, with companies and their suppliers under conflicting pressures to improve payment terms, reduce prices and improve cash flow efficiencies.

While supply chain finance (SCF) has been available for quite a while in various forms, it has only begun to show substantial growth globally over the last few years. As the pace of business continues to accelerate on a global basis, the number of trading partners to manage increases continually, as does the need to make transacting faster, safer, and smarter for both buyers and suppliers. SCF can play a significant role in achieving this.

Defining SCF
SCF can mean many things, but in general it refers to a set of technology-based business and financial processes that link various parties in a transaction—the buyer, seller, and financial institution—to lower financing costs and improve business efficiency. Banks, regardless of their size, definitely see SCF as a viable investing option. Supply chain software providers including Basware, OpusCapita, Ariba/SAP are also joining the trend and partnering with various financial entities such as PE firms and hedge funds.

There are a number of variants of SCF transactions, including the extension of buyer’s Accounts Payable terms, inventory financing, and payables discounting. SCF solutions differ from traditional supply chain programs to enhance working capital such as factoring and payment discounts in two ways:

• SCF connects financial transactions to value as it moves through the supply chain
• SCF encourages collaboration between the buyer and seller, rather than the competition that often pits buyer against seller and vice versa

For example, the buyer will attempt to delay payment as long as possible, while the seller seeks to be paid as soon as possible. SCF works especially well when the buyer has a better credit rating than the seller and can therefore access capital at a lower cost. The buyer can leverage this advantage to negotiate better terms from the seller such as an extension of payment terms, which enables the buyer to conserve cash or use it for other purposes. The seller benefits by accessing cheaper capital, while having the option to sell its receivables to receive immediate payment.

In addition to providing less risk for the supplier, it also improves the cash flow. SCF is a proven way for sellers to receive payment and increase cash flow at a time when banks have become more selective in their policies for extending credit.

Regardless of the variant, the success of a SCF solution hinges on the real-time visibility and integrity of transaction data, banking beyond borders, and enabling all participants to connect, interact, and transact at the speed of global business. Innovative financial platforms like Traxpay that provide total transparency, and combine and automate the necessary banking, transaction data, and B2B trade relationships are helping to usher in a new era of global B2B commerce.

About the author
Mr. Bruggeman’s extensive experience with enterprise software companies complements the banking and payment expertise of Traxpay’s executive team. Most recently John was chief marketing officer at Cadence, where he was responsible for corporate, product, and strategic marketing activities. Before joining Cadence, he was chief marketing officer at Wind River, where he oversaw product planning and management, corporate marketing, and field marketing. Prior to joining Wind River, John was vice president of marketing at Mercury Interactive; before that he was vice president of strategic planning at Netscape.

Company description
Traxpay, and its industry leading B2B Dynamic Payments platform is capable of executing and settling financial transactions and payments with rich data in real-time, anytime, anywhere, and with complete safety and security. Traxpay customers include B2B commerce network operators, digital marketplaces, and corporations who value the security, speed, flexibility, predictability, and savings the platform, and its many features, provide. Traxpay solutions were built to address the needs of modern B2B commerce and accelerate business across the supply chain. The company is privately held and is headquartered in Frankfurt, Germany with operations in Mountain View, California.