In the upcoming weeks, we will be publishing a series of articles explaining the reasons to join FCIreverse and the range of benefits for financial institutions, buyers and suppliers. This week’s article focuses on FCIreverse’s network and how it can help support its’ members.
Supply chain finance is a widely used working capital tool, bringing a range of benefits for Factors/Financial Institutions as well as for buyers and suppliers:
- Factors/Financial Institutions can build long-term revenues and grow new customer relationships, while also directing finance to – and thereby supporting – their clients’ supply chains.
- Buyers can improve relationships with suppliers, extend their days payables outstanding (DPO), and, if they choose to adopt self-funded supply chain finance solutions, achieve higher returns on their cash.
- Suppliers can reduce days sales outstanding (DSO), improve cash flow, achieve competitive funding costs and mitigate credit exposures.
But while the use of these techniques has grown rapidly in recent years, setting up a supply chain finance business is not without its challenges – particularly when buyers are working with suppliers in different countries around the world.
From navigating diverse legal jurisdictions to weighing up IT investments, creating a supply chain finance business can be expensive and time-consuming . At the same time, supplier participation rates in individual programmes can be hindered by legal, language or other issues that make supplier onboarding challenging in all but the funders’ own markets – and sometimes in those too.
That said, the industry is making steady progress in overcoming these challenges. In 2018, FCI – the global industry association for open account receivables finance – launched FCIreverse, a platform which supports multinational reverse factoring programmes for FCI members.
FCIreverse can be used to provide supply chain finance both using a traditional three-corner model and an innovative four-corner model:
- Three-corner model. FCI members can use this model to provide a platform for domestically-focused supply chain finance programmes incorporating buyer, supplier and financial institution.
- Four-corner model. This more innovative model supports multinational supply chain finance programmes by including financial institutions in both the buyer’s and suppliers’ markets. These collaborate to provide supply chain finance programmes and share revenues in line with an agreed structure.
By tapping into FCI’s network of close to 400 members in 90 countries around the world, FCIreverse enables members to set up cost-effective supply chain finance programmes , without the need for large IT investments or a lengthy implementation process. What’s more, members can co-operate to onboard suppliers in jurisdictions worldwide, resulting in a truly global supply chain finance offering. For members who already have platforms but lack global coverage, FCIreverse will complement their existing offering.
So compelling are the benefits of this approach that some funders are seeking to join the FCI network purely to take advantage of the platform.
Here is one of the reasons – unique to FCIreverse – why funders should consider joining the platform:
Take advantage of the FCI network
Corporations around the world are building increasingly global supply chains. At the same time, many are turning to supply chain finance – also known as reverse factoring – to improve working capital for both themselves and their suppliers, support their supply chains and build stronger supplier relationships.
In reality, many banks which offer supply chain finance struggle to onboard their clients’ suppliers in overseas markets. Varying language requirements, legal requirements and KYC procedures in different jurisdictions can present significant obstacles to efficient and broad-based supplier onboarding.
With close to 400 members based in more than 90 countries, the FCI network offers a way of overcoming these challenges. By using FCIreverse, members can work with their fellow FCI members in other markets to offer their clients cross-border supply chain finance solutions.
This means that members can:
- Take advantage of FCI’s four-corner model. As noted above, FCIreverse offers both a traditional three-corner supply chain finance model and a four-corner model which includes financial institutions in both the buyer’s market and the suppliers’ market. Revenues are then shared between the two FCI members.
- Retain control over their multinational programmes. In a typical multi-funder supply chain finance arrangement, individual programmes are controlled by the platform rather than by the participating banks. FCIreverse uses a different model: the buyer’s bank retains control over the programme, uses the FCI network to on-board and make payments to suppliers and shares in the revenues.
- Onboard overseas suppliers. Using FCIreverse, FCI members undertake supplier onboarding for other FCI members. So if a UK-based company has suppliers in Thailand, the UK-based FCI member can work with an FCI member in Thailand to onboard those suppliers.
Simply put, as an FCI member you can onboard your clients’ suppliers anywhere in the world – making cross-border supply chain finance straightforward to achieve.