kof goods that are moving. It opens the door to new ways of qualifica- tion, based on a deeper look into the parties involved. There are Fintech startups popping up that offer lending to consumers based on various data streams such as their social media and text data. Why? Because it provides
a broader, deeper and more colorful
compilation of insights into the consumer’s habits, practices and patterns
that are, in some ways, more effective
than credit scores in assessing likelihood of default.
Similarly, envision all of the data
streams surrounding suppliers and
manufacturers… beyond the web and
social. These companies operate within an entire ecosystem of partners,
customers and various constituents.
Those interactions and transactions
offer valuable insight. Tapping into
these data streams provides a wealth
of knowledge that can drive funding.
This is the direction we’re heading in
the future of trade financing. TSL
Kurt Cavano has overall responsibility
for driving GT Nexus’s strategic direction, for disseminating the company’s
track record of innovation and market
success, and for guiding key customer,
industry and partner relationships. He
has over 25 years of experience helping
corporations improve their business
performance through the intelligent
application of technology. Cavano
is founder of TradeCard, Inc., which
merged with GT Nexus in 2013. Featured as one of World Trade Magazine’s
50 most influential people, Cavano is a
frequent speaker and writer on topics concerning international trade and
global supply chain management.
the credit strength to qualify for funding. Or, think about suppliers in emerging regions where the cost of capital is
7, 8 or 10 percent locally. In industries
such as apparel, that cost of capital
makes up a significant portion of production. These companies are being
squeezed. They are prime candidates
for the fast-moving providers willing
to change the game.
Here’s how it unfolds in today’s
world of fast-moving supply chains.
Financial institutions have traditionally focused on financing a
specific product, based on credit. But
the dynamics of production and manufacturing have changed. In manufacturing, supply chains have shorter
time windows. The time from order
to delivery used to be a year, then 6
months, down to 3 months. In electronics, technology and components
change every 90 days. Supply chains
have to be dynamic. The pressures on
suppliers are significant. Businesses
have to be fast, agile and more data-centric. So does access to capital. This
is a huge shift for traditional bankers,
who often seek to finance only goods
that they can get their hands on.
A few years ago we got to a place
where we could factor receivables for
a vendor based on buyers’ credit. But
the future is about innovation, such
as making capital available without
looking at the seller’s credit – instead,
looking at performance analytics. It
all comes down to data. How do you
finance goods that are in-transit,
opposed to sitting in a warehouse?
In the financing industry, our way of
thinking has to be different. Supply
chains are faster. Transactions are
smaller. There’s little or no paper. It’s
Digital transaction processes,
combined with networked technology, opens the door to a new way of
funding trade. It enables financing
urt Cavano of GTNexus
discusses the arrival of
Uberization and disruption
in trade financing.
Technology and innovation are disrupting every industry on the planet.
Particularly, we’re seeing the Uberization of businesses and services upend
traditional practices and force the established leaders to rapidly evolve. In
these instances, it’s no longer the big
fish eating the smaller ones; rather,
it’s the smaller, faster and more agile
fish that are eating away the bigger,
slow-moving leaders. This is unfolding in the financial services industry.
We’re seeing changes, such as the
emergence of crowd-funding, bringing competition from well beyond the
boundaries of the financial services
industry. The world of trade financing
and factoring faces major disruption.
The future of trade financing is going to be centered around data. Traditional financial services providers can
no longer base global trade funding
decisions on paper documentation
and credit. The fast-moving players are
using technology to tap into networks
of trading partners and harness data,
such as transaction history between
parties, to drive funding decisions.
And low- hanging fruit is there, waiting for it. Consider the thousands of
small factories overseas in places like
Asia that have long-lasting relationships with U.S. buyers, who maintain
sparkling records of on-time delivery
and compliance – yet they don’t have
revolver TSL OPINION COLUMN