In 2019, long ago, before the pandemic uprooted everything, PYMNTS released a report titled “The Trade Credit Dilemma” that found US companies owed $3.1 trillion a day. focused on that.
Accounts receivable are things you owe, and ideally they should be converted into actual cash through debts and invoices, moving up and down the supply chain thread and into the supplier’s coffers. The reality is a little different and has ripple effects. The longer a company is delayed in paying its suppliers, the more likely that company will withhold (or be unable to pay) its suppliers.
Late payments can create headwinds for cash flow, and discounts can also negatively impact cash flow. Credit remains expensive as interest rates remain relatively high following central bank efforts to combat inflation.
The problem is global, with a recent study by the Asian Development Bank estimating that the global trade finance gap was $2.5 trillion in 2022.
The past few weeks have highlighted how the international arena is becoming an arena for partnerships, financing and, above all, the digitization of processes (invoicing and documentation) and payments, including supply chain finance. those gaps.
In an interview with PYMNTS earlier this year, Debopama Sen, head of payments at City Services, said that supply chains are evolving and that “people are doing business in person and digitally with completely different counterparties. “The evolution includes embedded trading,” he said. Financing options.
As for recent partnerships, as reported this week, Bank of New York Mellon (BNY) and Mizuho Bank are partnering to provide trade services to corporate customers in Asia. As announced over the weekend, the two banks signed an agreement on the bank connectivity of the correspondent banking network for international trade.
Separately, in the summer, Citi and the International Finance Corporation (IFC), a global development organization and member of the World Bank Group, partnered on a $2 billion sustainable supply chain finance program focused on emerging markets. did.
The project is under IFC’s Global Supply Chain Finance Program, launched in 2022 to address supply chain finance gaps for small and medium-sized businesses (SMBs) and expand access to sustainable supply chain finance. The organization said it was the largest such event to date. .
Last month, Drip Capital secured $113 million in new funding to accelerate new product development and growth of its trade finance digital platform. Drip Capital works with more than 9,000 buyers and sellers in more than 100 countries to help small and medium-sized businesses manage their cash flow and working capital, the company said. Over the past eight years, the company has financed more than $6 billion in trade deals. The company uses artificial intelligence (AI) to help assess credit risk.
Payment cannot be completed without proper documentation. Last month, Lloyds Bank began a collaboration with AI platform Cleareye.ai. This partnership in the UK uses AI to streamline trade finance document processing and compliance checks.
Additionally, the companies said the AI-powered technology will perform automated inspections of documents in accordance with the International Chamber of Commerce’s Document Credit and Collection Regulations, along with key compliance checks, including trade-based money laundering inspections.
Visa also collaborated with PYMNTS Intelligence to find that across 8 industries and 23 countries, 7 out of 10 loan report users We found that it improved the relationship between buyers and suppliers.
According to the report, as many as 68% of people “report that access to financing has helped them better meet customer demands and take advantage of opportunities.” Approximately 15% of the top companies used virtual credit cards and 41% used working capital loans.
Details: Bank of New York Mellon, Citi, Cleareye.ai, Cross Border Commerce, Devopama Sen, Drip Capital, Global Supply Chain Finance, International Finance Corporation, Lloyds Bank, Mizuho Bank, News, PYMNTS Intelligence, PYMNTS News, Supply Chain, Trade credit, trade finance, visas, working capital
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