Digital technology helps to upgrade supply chain finance market services

China’s supply chain finance has entered a new stage of digital development.

With the development of the digital economy, the fever for supply chain finance continues to climb. In recent years, financial management authorities have issued a series of relevant policies to promote the healthy and standardized development of supply chain finance. Market players related to supply chain finance have used emerging technologies to explore digital supply chain finance. In addition to financial institutions, technology companies have also participated in supply chain finance technology innovation to enhance the digital development of supply chain finance.

The supply chain finance model solves the problem of high-efficiency and low-cost financing among banks, core enterprises, upstream and downstream suppliers and distributors based on the background of real transactions, and its essence is to provide accurate and effective financial services for more small and medium-sized enterprises.
In fact, under the traditional supply chain finance model, it is a common problem that it is difficult to confirm the rights of the core enterprises. The reason is that there may be thousands of suppliers upstream of a core enterprise, and it is difficult for the core enterprise to confirm the right of each one of them, which makes it difficult for the upstream suppliers to get financing. In addition, the core enterprises are mostly central enterprises, state-owned enterprises, listed companies or leading private enterprises, which have a large amount of low-cost funds and idle credit in banks, which need to be further revitalized.
Based on this pain point, a technology company applied Internet technology to create an “electronic payment commitment letter”, which solves the difficult problem of confirming the rights of core enterprises in the traditional supply chain finance industry, further revitalizes the idle credit of core enterprises in banks, and transmits the low financing cost that only core enterprises can enjoy to suppliers at all levels in the industry chain, thus solving the difficult financing problem of SMEs at the end of the industrial chain.
Industry insiders believe that after digitizing accounts receivable, real and visible trade scenarios can help banks better access the industrial chain, thus allowing low-cost bank funds to replace high-cost private funds and bring real benefits to SMEs.

In fact, technology companies often play the role of the underlying service provider in the supply chain finance ecosystem. With technology services as the entry point, the financing problems of SMEs are effectively solved by connecting core enterprises, SMEs and financial institutions in the chain.
With the support of scientific and technological capabilities, the digital supply chain ecology built by technology companies can make information flow, capital flow, business flow and logistics form a state of interconnection. The core enterprise side can optimize the information flow and strengthen the control of the supply chain by means of chain genus and data; the chain suppliers can obtain enterprise qualification by means of chain or ticket and obtain financing at lower cost; the financial institutions can improve the efficiency of risk control and overall service capability, thus enhancing the operation efficiency of the whole supply chain financial ecology.
At the capital end, technology companies realize the post-docking cooperation with banks, financial companies, factoring companies and other financial institutions, and take the professional information platform and risk assessment system as the starting point, to quickly respond to the comprehensive needs of enterprises in the industrial chain, so as to broaden the service scope of financial institutions and improve their service efficiency.
It is understood that the financial technology platform has achieved total-to-total docking with more than 100 banks nationwide, and more than 1,000 branches nationwide, and has maintained long-term cooperation with many finance companies, factoring companies and brokerage firms and other financial institutions, relying on a shared and common service team to help enterprises and financial institutions share platforms, back offices, marketing and financial services, and build a “one-stop” industry and finance sharing service platform.
Industry experts say that by building a supply chain finance ecosystem, taking the data-empowered industry chain and scenario as the entrance, integrating resources and optimizing the value chain from the perspective of the whole industry chain, it can reduce the production and operation costs of enterprises, improve the efficiency of capital use and realize the optimal allocation of resources.

 The size of the supply chain finance market (mainly receivables, prepayment and inventory) has increased from 16.7 trillion yuan in 2016 to 24.9 trillion yuan in 2020, with a compound annual growth rate of 10.5%, and will further increase to 28.6 trillion yuan in 2021. The role of supply chain finance has been more prominent in stabilizing the industrial chain and supply chain and solving the financing difficulties of micro, small and medium-sized enterprises.

The rapid development of digital technologies such as cloud computing, the Internet of Things and artificial intelligence has greatly promoted the change of social production organization and supply chain management model innovation, bringing new changes to the development of supply chain finance.