B2B Products /Branches
SWIFT / ACH
Products / Branches
Client X Client y
eRP Bus Service
Payments Tax / VAT
Credit / Debit Notes
Invoices Purchase Orders
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Challenges (same as in model 2, but increasingly intensive)
– Risk assessment and ownership as trans- actions are not directly originated
– Extension of the SCF ‘value chain’ with all its potential side-effects
– Increased complexity of data-handling
– Need for a commercial model that satis- fies all involved market players, need to share revenues
– Data protection / bank secrecy (banks being not supposed to share client data with external parties)
– KYC requirements
– Complexity of the required legal frame- work (e.g. legal ownership of claims)
– Tax implications (a distinction between ‘financing’ and ‘data exchange’ may trigger VAT obligations for the non-bank related portion of the service)
– Banks may lose their ‘USP’ compared to the first model.
Opportunities
– Provides corporate clients with an additional source of funding and potentially more attractive commercial conditions
– Provides banks with a source of SCF expe- rience without establishing SCF origina- tion capacity or an additional market for diversification and distribution capability
– Potentially augmented scope in terms of available product features and transac- tion flows
– Market players can focus on their core business (e.g. shift of client onboarding activities from banks to B2B platforms or further business partners)
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best practice guidelines and industry rulebooks have a place in the industry and may lead to tangible projects pursued through the above mentioned industry governance structure in the non-competitive space. As a starting point the development of a common market terminology and good practice guide- lines would appear to be worthwhile activities requiring attention.
Risk sharing and secondary market development
Although supply chain finance is primarily a competitive matter, collaboration is required for risk sharing for a) larger multi-bank deals and/or b) establishing standard risk measure- ments to allow competition for transactions with different risk profiles, and c) commonly accepted rules and procedures. A common risk model established as the result of a col- laborative effort enables banks to individually decide (i.e. compete) on SCF opportunities, eventually sharing risk with or without the support of outside funding. Risk sharing is or might be organised through specific commer- cial intermediary organisations or by means of established inter-bank arrangements.
Communication and marketing
For the generic promotion of the benefits of supply chain automation and SCF there are potential benefits of collaboration in infor- mation dissemination, in generic marketing activities and education. Education, commu- nication and training are seen to be critical activities as the SCF market seeks to gain further traction.
Collective collaboration is recognised as a growing need and the SCWG has identified or confirmed numerous areas of potential collaboration among financial institutions and other stakeholders.
Governance
Creation of a governance structure a maturing industry that creates a collab- orative agenda needs to create effective and united membership organisations to act as industry bodies in the non-competitive space, and take responsibility for collective collaboration. Such a collective body should have open and transparent admission criteria. Such organisations provide continuous and direct communication with governments and regulators to promote industry standards and market rules at both a regional and global level and to provide membership services. There is also scope for industry bodies rep- resenting one sector to reach out to bodies from other sectors.
Regulatory cooperation
Creating a common approach to the regu- latory regime and the developing common definitions for regulatory compliance should continue to be a valuable role for collective collaboration. There is a need for an industry effort to engage in direct and continuous communication with governments and regula- tors on matters of collective importance to the supply side of the industry in the regulatory sphere.
Industry schemes and joint projects Experience of market development can lead to the recognition that collective schemes, 6.2
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that the active efforts in the development of standards for supply chain management in general have so far not been accompanied by equivalent efforts to develop standards for the integration of related financing services. Infrastructure
Collective cooperation between banks and B2B networks, marketplaces and platforms
Although collaboration with such providers is usually based on bilateral one-to-one relationships, there may be opportunities to explore collective modes of collaboration and working agreements on an industry basis. Such modes of collaboration may be on the basis of a ‘club’ or ‘association’ approach to creating a shared platform, or through indus- try initiatives with very wide participation. Such opportunities could include the pro- vision of complementary capabilities at an industry level such as e-invoicing, logistics, information services and even the collective origination and distribution of financial trans- actions. Corporate clients are increasingly pointing to the need for multi-bank portals and portal providers of various kinds are active in the market.
For banks, however, proposals for multi-bank platforms are often controversial and need to find their moment, a time when industry consensus emerges on the need to create such infrastructure. In the SCF marketplace, proprietary platforms are still in their early stages and the concept of abandoning such platforms is not widely accepted. It is also an understandable reaction that the challenges of managing common technology projects are not trivial. However, collaborating over the long term on a collective basis could be Standards
Cooperation on interoperability and technical standards
Interoperability is the ability of two or more systems or components to exchange informa- tion and to use the information that has been exchanged. To guarantee interoperability, an important aspect for collaboration relates to establishing standards and implementing them consistently.
A number of layers of collaboration have been identified including the business level, the semantic level such as data formats, and the technical or syntactical level. Interopera- bility represents the capability to run business processes seamlessly across organisational boundaries and is achieved by understanding how the business processes of different organisations can interconnect. Seen as a central prerequisite to establishing e-busi- ness, interoperability enables information to be presented in a consistent manner between business systems, regardless of technology, application or platform. It thus provides or- ganisations with the ability to transfer and use information across multiple technologies and systems by creating commonality in the way that business systems share information and processes across organisational boundaries. Whereas the supervision of standards development is often taken by the industry governance body, technical standards for data formats and message types are usually developed by standardisation organisations, such as ISO, UN/CEFACT, and SWIFT. There is a need to develop a standards strategy and development plan for those standards consid- ered important for SCF market development. The potential for the re-use of existing stand- ards should be explored. It is noteworthy
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for entry. The SWIFT TSU development illustrates this kind of thinking.
A possible collective cooperation model is captured in the ambitious idea described below for a fully networked environment (Figure 23).
an avenue worth exploring. This could be undertaken on the basis that the dialogue is confined to noncompetitive propositions, such as for utility services or for services with high entry costs (e.g. where network econo- mies have already been developed) or where individual banks cannot see a business case
Description
– Fully standardised and integrated market- place for the exchange of all conceivable transactional data
– Networks are connected with pre-agreed access and privileged rights
– Banks and B2B networks cooperate in a modularised, ‘plug and play’-like manner
– Deal-based free choice of the party rendering the data exchange and financing
– Standardised formats, contracts and risk distribution models
– ‘Open’ model based on a peer to peer approach