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Supply chain finance disruptors may not weather a downturn, warns expert

Lionel Taylor, founder of the Trade Advisory Network

The interest being shown by data-centric companies like Amazon and Apple in the financial services market may wane if economic downturn drives them back to their core business, a leading trade advisory body has suggested
The Trade Advisory Network, a specialist consulting firm specialising in trade and supply chain finance, said that holders of mass data, such as the major web commerce players, have been looking to disrupt the established supply chain finance market at the expense of the traditional banking sector.
Those controlling mass transactional data between the buyers and sellers, it said, are using their platforms to advance the settlement of a payable or receivable, all at the click of a button and without the application processes and controls that a bank will undertake with an applicant.
“But whether such new players in the provision of finance will become a real threat to the established banking order depends partly on the adoption by the buyers and sellers that use their platforms,” said Lionel Taylor, founder of the Trade Advisory Network. “It also depends on the resultant generation of revenue that will be achieved net of any credit losses that may be incurred along the way. It is the latter that may result in some waning of their early enthusiasm, especially if economic conditions result in a more restrictive credit approach that may interfere with their primary marketplace activities.”
Some traditional banking players, he said, regard current attempts to disrupt the market for supply chain as being temporary, reflecting the current benign economic climate: “They believe that, as soon as an economic downturn or recession hits, many of these marketplace providers will retreat back to their core activities,” he concluded. “In this they may have a point, as the banks have seen other disruptors, such as logistics providers for example, dip in and then out of supply chain finance when economic conditions toughen.”

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