As coronavirus continues to bring chaos around the world, the global economic structures and supply chains face severe changes, and black swans springs up like never before. Undoubtedly the core institutions and suppliers are the biggest victims in the wave of recession, seeking for short-term financing to keep their institutions open.
“ Looking back in history, financial crisis often spurs a new financial innovation. ”
Financial Innovation emerges in the financial crisis in 2008.
As the financial system breakdown in the crisis, suppliers became hard to finance with accounts receivables, while enterprises have difficulties managing their low return yet increasing proportion of. Partner up and they could help each other through the crisis, as the both parties resembles the buyer and seller of supply chain. It is under this background that C2FO came into being.
C2FO took advantage of the suppliers’ urgency of converting receivables into cash and the potential demand of core companies to increase the cash flow return on investment, creating a market for “accounts receivable early payment discount”, facilitating both parties working capital at once. It uses the advantages of the Internet platform to replace the early repayment of receivables from the core enterprises to the suppliers and sporadic processing of the receivables. At the same time, it also opens up a fast financing path for suppliers without "finding banks".
Supply chain finance model is faster than looking for banking
Under this new supply chain finance model, since the supplier converts the interest originally to be paid to financial institutions into an early payment discount to the core company, if the core company accepts the discount rate, it will directly pay its original amount in advance. As a result, there is no need to rely on the credit review process of financial institutions, and it has nothing to do with the credit limit of the enterprise. The complicated procedures and waiting time for corporate loans of financial institutions in the past are eliminated. The supplier can obtain the application on the next payment date. Early collection of receivables.
The model is simple
Since its development in 2008, C2FO has accumulated a number of large global corporate customers, such as: Costco, HP, PHILIPS, Intel, PFIZER, MACY'S department store, NORDSTROM department store, etc. These core companies have participated in this non-traditional supply chain financial. At the same time, C2FO, a new venture, has also been favored by the capital market. In 2019, it was invested by the SoftBank Vision Fund, and the total amount of funds raised has exceeded NT$12 billion. It proves that although the model is simple, it can successfully create a new market structure and realize more advanced and efficient financial innovation when it emerges at the right time and strong industrial demand.
"Never waste a crisis." Said by Churchill
What kind of financial innovation will emerge from this wave of epidemic?
This time it’s not just a crisis for financial institutions
This time, the world faces even greater challenges. Not only the financial industry, but also major economies around the world are in a state of shutdown. Coupled with the strong dependence of globalized industrial chains, the epidemic has made the industrial situation more turbulent and difficult to deal with, and countries have appeared unable to withstand the impact of the epidemic. Symptoms of "supply chain reorganization" and "de-globalization" issues followed. Under this circumstance, no matter how big or small a company is, its cash flow is squeezed or even exhausted. With the increase in external environmental variables, only the supply chain finance model formed by the collaboration of core companies and suppliers is no longer sufficient to withstand the larger scale today. And severe structural problems. Core enterprises, suppliers and financial institutions must re-cooperate in a more balanced and efficient way to form a supply chain financial ecosystem In addition to the collaboration within the industry, the capital (financial institution) supplementing the operating water of the industry is also the key to the inclusive development of supply chain finance. The supply chain finance model of "mainly based on suppliers and funders" or "only suppliers and core enterprises" is not enough. Only when suppliers, core companies and capital parties construct a tripartite more balanced and more efficient collaboration model, can we cope with the current industrial situation in which black swans are flying all over the sky and establish a more stable and sustainable supply chain financial ecosystem.
Blockchain is the best joint for multi-party collaboration
When the role and number of participants in collaboration increase, the complexity of collaboration and the difficulty of trusting each other also increase. In particular, core companies and financial institutions are both larger entities. How to string these three parties together? Under a jointly identified system, transferring data and assets and other values has always been a technical problem.
Since 2015, around the continuous development of a series of enterprise trust technologies led by blockchain, a value exchange network that "does not need to rely entirely on intermediaries" has been realized. Different business entities have developed a distributed technology architecture based on blockchain. Next, each other's data and value will be guaranteed, and each other's rights and interests can also be balanced under the design of blockchain alliance governance. The emergence of blockchain will undoubtedly bring solutions to this problem and become the best joint agent for tripartite collaboration in supply chain finance.
A new type of supply chain value internet will eventually appear
The impact of this wave of epidemic is long-term. We expect that suppliers, core companies, and funders will inevitably develop closer collaborative operations, and the traditional supply chain finance model that cannot resist the black swan will gradually be replaced and replaced by it. It is a "supply chain value interconnection network" where multiple parties participate and asset values can circulate efficiently.
BSOS is a cooperation promoter that uses blockchain as its core technology to assist enterprises in establishing a value Internet ecosystem. We continue to work hard to promote and hope that we will bring a fairer and more efficient business collaboration model to the world, and practice the supply chain financial innovation that belongs to this era.