I. The history of supply chain finance
Supply chain finance refers to a comprehensive financial industry and service provided to upstream and downstream enterprises in the supply chain by taking the core enterprise in the supply chain as a whole, relying on the core enterprise, taking real trade as a prerequisite, using self-liquidating trade financing methods, and closing the flow of funds or controlling property rights through means such as pledge of accounts receivable and pledge of goods.
The development of supply chain finance abroad has mainly gone through three stages: the inventory pledge stage in the mid-to-early 19th century; The dynamic pledge stage from the mid-19th century to the 1970s; Since the 1970s, there have been supply chain finance businesses such as accounts receivable financing, advance payment financing, factoring, and insurance.
However, China’s supply chain finance business started relatively late, and it was only after 2010 that domestic banks, logistics companies, and core enterprises began to gradually experience a leapfrog development process from simple to complex supply chain finance.
At present, the development of domestic supply chain finance is characterized by a large number of participating entities, a basic decentralization, and a gradual trend towards online, platform-based, and intelligent development. At the same time, relying on the rapidly developing domestic transportation network, a trend of gradually covering from coastal to inland warehousing networks has been formed. Moreover, through the rapid development of the Internet of Things, technological breakthroughs have been made in stages, and a supply chain financial ecosystem with the integration of capital flow, logistics, information flow, and business flow is taking shape.
In view of the above development situation, the domestic supply chain financial service model and the leading business model also show a trend of diversification, but the core remains unchanged. Ultimately, several main business models can be summarized according to different dimensions.
The trade progress of the supply chain can be divided into financial services in the order procurement stage, financial services in the inventory storage stage, and financial services in the sales collection stage.
Based on the different participants, it can be divided into the core enterprise-led model, in which the core enterprise plays a particularly crucial role in the chain; The third-party supply chain service provider-led model, where the information aggregation capabilities of the service provider are particularly important; The mode dominated by logistics e-commerce platforms, under which the integrity of the platform’s transaction ecosystem is most prominent.
It can be seen that the core of supply chain finance is the connection of production, trade, logistics and finance.
In short, the business model of supply chain finance can be divided into three scenarios:
- Seller scenario 2. Buyer scenario 3. Logistics scenario
II. Financial technology is on the way to becoming practical.
This is an inevitable development of financial technology and an inherent requirement of the development of digital economy. In such a context, how to better empower the industrial chain and supply chain with financial means has become a new choice for more and more financial technology players.
From the current development situation, the traditional supply chain finance model cannot meet the needs of the industrial chain and supply chain. Whether it is the lack of ability of the “chain leader” enterprise or the complexity of the industrial chain and supply chain, we can clearly feel that the traditional supply chain financial system is encountering more and more development bottlenecks. How to create a new paradigm of supply chain finance that combines technological, industrial, and financial aspects through the evolution of traditional supply chain finance, and find the intersection of high-level cycles of technology, industry, and finance, has become the key to breaking through the bottleneck of traditional supply chain finance development.
- With the support of technology, we have a one-stop supply chain and finance
Looking at the current supply chain finance players, either they focus on finance or supply chain, and few players can achieve a perfect integration of supply chain, finance and technology. This development model, which focuses on one aspect while neglecting others, will ultimately bring the development of supply chain finance into an unbalanced state. If this continues, the development of supply chain finance will inevitably fall into a dead end.
The author believes that the essence of supply chain financial technology determines that the player must be a “versatile person” who is proficient in supply chain, understands finance, and deeply cultivates technology to assist in industrial digitalization. Only in this way can it truly understand what kind of financial services are needed at the supply chain end, and it can find the right ways and methods to empower the supply chain with finance. If we are looking for a new paradigm of supply chain finance, which combines the characteristics of supply chain, finance, and technology, especially those who have long been engaged in these three fields, they may be the first to take the lead.
- Meet the needs of personalized and multi-scenario
Supply chain finance is not exclusive to a certain industry or certain industries. It must be able to meet the needs of different industries, different users, and different scenarios. Only in this way can finance truly return to the real world and empower the real world. One of the important reasons why traditional supply chain finance encounters so many bottlenecks is that it only uses a single product to supply diverse users, which ultimately makes it impossible to meet the financial needs of the supply chain in a precise and targeted manner, let alone being inclusive.
When we explore the new paradigm of supply chain finance, it is necessary to consider meeting the needs of individualization and multi-scenario as the top priority to be addressed. It is foreseeable that in the future, the players who can truly make a difference in the supply chain finance industry are inevitably those who can provide refined and accurate financial services to a large number of supply chain industry chain enterprises.
- Expand the ecological system and achieve fission
In essence, supply chain finance is a huge ecosystem. In such an ecosystem, it is not only composed of the “chain leader” formed by the core enterprises, but also includes upstream suppliers, downstream distributors and retailers. Therefore, in order to do a good job in supply chain finance and create a new paradigm of supply chain finance, it is necessary to break away from the traditional development model dominated by core enterprises, and build a huge ecosystem by including many relevant parties to create a collaborative ecosystem, so as to achieve fission.
- Strong and intelligent risk control system
Any financial species and any financial model must be based on risk control. In a sense, financial work is about risk control. When we explore the new paradigm of supply chain finance, building a strong and intelligent risk control system to ensure the stability and long-term development of supply chain finance is the key. It can be said that without a strong and intelligent risk control system, even the most innovative supply chain finance model will be overshadowed.
For every player who is trying to make a difference in the field of supply chain finance, finding a risk control model that suits them and can maximize their own advantages is the key to determining whether they have grasped the evolution of supply chain finance. Specifically, the core value of the supply chain financial technology platform is to drive through the dual-wheel of risk control and operation, with technology as the support, to assist, support and improve the compliance of financial business, better identify credit risk and operational risk, and enhance efficiency, experience and asset scale.
A strong and intelligent risk control system not only effectively ensures the rapid and efficient operation of supply chain finance, but also guarantees the security and stability of finance itself. For supply chain finance, this is the most critical and worthy place for us to pay attention to and think about.
Supply chain financial technology is undoubtedly an inevitable path and important means for financial technology players to achieve “realistic growth”. However, for a long time, the bottleneck that has plagued supply chain finance itself has ultimately limited its development, making it unable to assume the function and role of connecting the upstream and downstream of the industrial chain and supply chain, and even more unable to achieve high-level circulation of technology, industry, and finance.
Shanghai Niuinfo Technology Co., Ltd. is a digital service provider for supply chains, with its headquarters registered in Shanghai and R&D branches established in Suzhou and Dalian. As a leading player in the high-end market of digital services for China’s transportation and supply chain industry, Niuinfo boasts a comprehensive suite of logistics and supply chain management information technology products, extensive system implementation experience, and robust management consulting capabilities. We are dedicated to driving innovation in the circulation system through information technology and services, empowering enterprises in their digital transformation of supply chain management – fulfilling our mission of “Connecting Businesses Digitally, Structuring New Economies in Industries.”
