Poor onboarding practices can stall the trade finance process.

In any supply chain finance sales cycle, there are three and perhaps only two sales to get the cash register to ring. First, a bank or vendor must convince the large buyer that this program makes sense for their organization, a feat that on paper is rather simple, but in actuality is quite complicated and time consuming. Second, for vendors selling the neutrality and multiple funding model, they must then “sell” funding providers to provide the credit necessary for this buyer’s suppliers. Again, not simple in this day of tougher credit policies.

The third sale, and potentially the hardest, is selling suppliers. To date, the buyer’s procurement team has played the role of a sales force for the finance provider. These people are not necessarily the best sales team, particularly for selling such a complicated product. The easy wins are already done by strong buyers mandating the program to suppliers.

The Great Recession has effectively reduced the number of buyer candidates for these programs from an already small pool. Now, originators will have to decide about going downstream. When you do this, selling the supplier on the merits of the program involves navigating multiple decision makers, including treasury, finance directors, sales, legal and tax. This is not in a typical bank’s DNA.

To dissect why onboarding is so challenging, let’s look at the root causes:

How to address these above causes and get a more effective onboarding practice? Well, let’s start by saying this is hard work. Call centers, Webinars, and Internet platforms do not do the heavy lifting. Investment in resources, both internal and third-party, needs to be made. Why? Suppliers need compelling reasons to switch their financing methods, which translates into banks having to navigate multiple decision makers in a supply chain finance supplier candidate to understand that institution’s decision drivers and highlight the advantages of the supply chain finance program versus other financing options. Proper segmentation analysis needs to be done, not always just on spend, but risk and criticalness to production.  It is hard to invest, but unless it is done, we will continue to see programs in place that are not well utilized. wt

David Gustin is President of Global Business Intelligence in West Vancouver, British Columbia, Canada (www.globalbanking.com), and is a member of WT100’s editorial advisory board.