Fernando Diaz, BBVA: "More and more European companies are adopting SCF solutions"

Could you explain what is BBVAs supply chain finance proposition?

First of all, I would like to point out that during this interview when we use the expression supply chain finance we are referring to the solution defined this year by Global SCF Forum as “payables finance”.

At BBVA we have a wide range of solutions based on the specific needs of our clients, from multi-country and multi-currency programs that we operate on our global platform, where suppliers can be located anywhere in the world, to domestic programs focused on a specific country and currency.

What is your target segment? How many of your clients are global companies?

Over the years BBVA has determined that SCF programs meet the needs of a very wide range of clients, from large global corporates to domestic companies with local operations, as long as these enterprises are really interested in improving the financial health of their supply chain and/or in optimizing their working capital.

For this reason, at BBVA we serve these segments from specialized business units. Right now, for example, global companies managed by BBVA in Europe account for approximately 37% of total assets, even though they only account for 10% of the number of active SCF facilities.

What is the position of BBVA in Spain’s supply chain finance market in terms of market share?

In all the geographical areas in which we operate we have a share in the SCF market very consistent with our general share in the system. For example, in Spain, where BBVA, along with other banks, was a pioneer in this business, we have a 20% share. In recent years we have achieved sustainable share increases in markets as relevant as Mexico and Peru, reaching percentages of 18% and 29%, respectively.

Could you share some numbers in terms of supply chain finance turnover by industry?

The different participants in this market we do not disclose the information. However, I can tell you that SCF facilities can be useful in virtually any industry or sector of activity. In this respect and specifically in 2015, at BBVA, S.A. the manufacturing, distribution and construction sectors accounted for over 60% of our activity.

When running a business internationally, things get complicated due to different jurisdictions, many players involved and, not to forget, unique client needs. What does it entail to take supply chain finance globally?

In a multi-country implementation we are usually faced with two crucial questions. First, how to quickly and effectively reach all the suppliers that a buyer wants to add to its SCF program. This is why we need completely digitized onboarding processes on our global platform supported by a centralized team specializing in providing service to suppliers. The second key success factor is the integration with the buyers systems. Also, in this case, we have a centralized solution that facilitates the buyers connection through any format and channel with our global and local platforms.

Have you found something particularly interesting in Europe or Spains SCF market that you couldnt identify somewhere else and on which a bank can capitalise?

Traditionally, the approach followed by some banks in the SCF area has been to offer a comprehensive service that includes funding for the suppliers of their clients plus management of payments upon maturity in the case that invoices have not been paid in advance. For this reason, some banks, including BBVA, have developed SCF services capable of incorporating and providing service to all the suppliers of their clients.

One differential advantage we have at BBVA is our ability to provide service to all the suppliers in a supply chain, including the group of suppliers known as “long-tail”, i.e. a large number of suppliers with relatively small amounts of accounts receivable.

Is Europe a great market for supply chain finance? Why?

Yes, absolutely. The reason is clear: we are seeing that every day more and more European companies are becoming interested and adopting SCF solutions, while active clients expand the scope of their programs to new geographical areas, suppliers and currencies.

How would you describe BBVA’s relationship with fintech vendors?

As happened in other financial services, new entrants to the SCF market are trying to “fragment” the value chain, position themselves and specialize in specific parts of the value chain through a number of strategies.

Taking this into account, our approach at BBVA is one of collaboration. First, we find out in detail what the capabilities of those vendors are and, if those capabilities contribute to enhancing our value proposition for the client, we incorporate them naturally into our offering.

What are the 3 main areas where fintech could transform supply chain finance?

We are already witnessing how some banks have chosen to adopt as their own the technological platforms of fintech, giving up their proprietary developments. In addition, there is still great potential in using Data Analytics techniques in the case of SCF. Lastly, fintech companies can speed up the development of the SCF market for non-investment grade companies.

About Fernando Díaz

Fernando Díaz currently heads the Global Supply Chain Finance team at BBVA. He has over 15 years experience in banking. He previously held Product Development positions in the Cash Management and Working Capital areas, and in corporate functions in BBVA Group. He graduated in Telecommunications Engineering and completed his studies with postgraduate training. He began his professional career as a consultant at Arthur Andersen. He also worked at Adquira (B2B Marketplace) holding positions in Business Development.

About BBVA

BBVA is a multinational group providing financial services in over 35 countries and to 66 million customers throughout the world. The banking model used by BBVA is based on four pillars: a diversified and balanced portfolio model, in terms of geographies, businesses and customers; a customer-centric business model; a management model characterized by two principles inherent in BBVA: prudence and foresight; and a governance model based on integrity and transparency.