Mercator Blog

Supply Chain Finance Continues to Expand With Modern Technology and Broadening Approaches by Fintechs
Date: July 31, 2018
Steve Murphy
Director, Commercial and Enterprise Payments Advisory Service
The global economy in 2018 is projected to be roughly $80 trillion. At the current 3.6% level of growth, the export of merchandise and services will come to around $24 trillion, so these figures clearly show how globally distributed economic activity has become. International trade finance has historically been dependent on traditional methods (documentary collections and letters of credit), which have been heavily burdened by paper-based processes and industry-specific requirements. The move to open account types of trade financing is relatively new and accelerating since the financial crisis. This trend has been driven by a combination of factors, including the ongoing global advancement of communications and digital solutions, which, through easier access to risk data and greater familiarity, allows for increased trust between distant counterparties. Another key factor to open account trade is a greater focus by senior financial professionals on more effective management of working capital.

The Mercator Advisory Group research report, Supply Chain Finance Market Review, provides the latest views of the trade finance market and participants from both an international and a domestic purview, then dives into the continuing shift toward open account transactions. We then address the supply chain finance (SCF) market in a number of ways. The report provides a detailed discussion of the key drivers that shape SCF. We then discuss the most prevalent SCF tools in use, the different business approaches being taken by players in the space (banks and fintechs), and finally how emerging technology fits within the SCF space, both currently and into the next decade. A previous Mercator Advisory Group report, Supply Chain Finance Is Coming of Age, released in May 2016, provided detailed descriptions of the various forms of both SCF and traditional trade finance tools, along with a detailed financial case on the benefits of managing working capital to free up cash.