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  5. SCF is dead. Long live GTS

SCF is dead. Long live GTS

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21 September 2009

Two years ago at SIBOS most of my interactions were around the topic of what was SCF (Supply Chain Finance). Banks were truly interested to know more about it.

Last year, at SIBOS in Vienna, the conversation was on what banks had ready (or almost so) to go to market with their SCF products and services. The questions were about pricing and what technology was best.

This year, at SIBOS Hong Kong, SCF was “missing in action”.

Apparently the term is not so “catchy” any longer. Major cause, in my opinion, is because SCF has been always confused with Supplier Finance (i.e., invoice-centric, post-shipment, payables financing). This has relegated the entire area to a subset of Trade Finance, at the very best at the same level as LC’s (letters of credit).

When I was almost there to surrender to frustration (SCF is one of my preferred areas of coverage – read my reports Supply Chain Management: A Source of Corporate Liquidity and Business Models for Supply Chain Finance Services) to my rescue came the panel with the heads of Global Transaction Services (GTS) from Citi, HSBC, BofA, Deutsche Bank.

Well, what they were taking about as the “next big thing” was, guess what?, Supply Chain Finance services. They just used a different tag: GTS.

This is not to say that GTS is a new invention. What is new, I feel, is that the services under the GTS “umbrella” (cash, trade finance, payments, FX) will be ever more offered in bundle, to cover the financial supply chain needs of corporate clients.

Bottom line for banks

  1. SCF is not (only) supplier finance
  2. GTS is the name of the game
  3. Internal organization, knowledge of business processes, and technology investments are the pillars

Bottom line for corporations

Start comparing banking offers under the light of their ability to cover the larger spectrum of the procure-to-pay and order-to-cash processes

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