Technology Investment Drives Growth in Supply Chain Finance
Technological advancements in digitalization and automation have led to significant growth in the supply chain finance (SCF) market. According to a report by Allied Market Research, the global SCF market is projected to reach $13.4 billion by 2031, growing at a compound annual growth rate of 8.8% from 2022 to 2031. These advancements have made SCF more accessible and efficient, resulting in the proliferation of platforms and solutions that streamline the processing of invoices and payments.
SCF Bridges the Gap in Working Capital Management
The increasing complexity of supply chains has made managing working capital more challenging. SCF acts as a bridge between payment terms and the actual flow of goods, helping buyers and suppliers improve their cash flow. For suppliers, SCF accelerates receivables, while for buyers, it extends payables. This efficient management of working capital has become essential in uncertain times, making SCF an attractive investment.
Regulations and Sustainability Drive the Adoption of SCF
Regulatory changes, such as the UK’s Electronic Trade Documents Act and the US Financial Accounting Standards Board’s Accounting Standards Update, have reduced legal and operational barriers, encouraging companies to adopt SCF. Additionally, there is a growing demand for businesses to address human rights and environmental risks in their supply chains. SCF is increasingly being used as an incentive to encourage sustainability, with both banks and nonbanks offering sustainability-linked SCF programs.
Resilience and Risk Mitigation in Supply Chains
Recent global events, including the Covid-19 pandemic and ongoing supply chain disruptions, have highlighted the importance of building resilient supply chains. SCF plays a crucial role in providing access to financial resources and improving cash flow management, contributing to the resilience of supply chains.
Global Recognition for Leading SCF Providers
The Supply Chain Finance Provider Awards 2024 recognized leading banks and non-banks for their contributions to the SCF market. Winners included Citi as the Best Supply Chain Finance Provider – Bank, Orbian as the Best Supply Chain Finance Provider – Non-Bank, MUFG for Best Customer Implementation, and Premium Technology for Best Dynamic Discounting Solution. Regional winners were also recognized for their excellence in different regions around the world.
The Future of SCF
The growth of SCF can be attributed to its ability to enhance working capital management, strengthen supplier relationships, and mitigate risks in complex supply chains. As technology continues to advance and regulations and sustainability initiatives drive the adoption of SCF, its importance and impact on global supply chains are expected to continue increasing in the future.
Analyst comment
Positive news: Technology investment driving growth in supply chain finance, projected to reach $13.4 billion by 2031, with a compound annual growth rate of 8.8%. SCF bridges the gap in working capital management, addresses regulatory changes, sustainability, and resilience in supply chains. Global recognition for leading SCF providers. SCF’s importance and impact on global supply chains expected to increase in the future. Market outlook: SCF market will continue to grow as technology advances and companies prioritize working capital management and risk mitigation in their supply chains.
