How IT is helping tackle CFOs’ supply chain issues

It’s safe to say that CFOs have had a tough run of it lately

They’ve had to manage cashflow and liquidity issues, shift to home and hybrid working and manage uncertainty and volatility in financial markets. 

A recent BDO survey of 600 finance leaders found that supply chain disruptions were top of their list of concerns. The report says, “the pandemic exposed weaknesses in global supply chains, [but] these issues were percolating well before.” 

One of the many struggles CFOs have when it comes to their supply chains is that traditional banking is too slow, clunky and expensive to effectively handle their global needs. It can take weeks to set up international accounts, it’s expensive and slow to pay suppliers and there is no transparency. 

In the era of same-day shipping, traditional banking is not fit for purpose. But a new generation of fintechs are working with IT teams to help power new technology approaches. These are transforming the ability of CFOs to manage international banking and pay their suppliers in multiple currencies, quickly and efficiently to avoid supply chain disruption. 

Traditional banking is not fit for modern supply chains 

Setting up an international bank account with a traditional bank can take weeks.  

It’s a drawn-out process that has become unnecessarily complex for businesses with limited resources, and with cross-border payments, it’s often necessary to have a different bank account for each country or currency, which then operate in silos.  

So, if a business experiences supply chain disruption and needs to onboard a supplier in a different market, it can take weeks to get the infrastructure in place. 

When they eventually do get set up, businesses then trying to pay their suppliers and are met with weeks of processing time and high costs. Nearly all banks don’t just charge the exchange rate and FX margin, they inflate the overall price. To exacerbate the issue, the more banks involved in the process, the higher the processing fees. 

Brexit has also added to the problem as European banks no longer consider euro payments to the UK as bound by SEPA rules. Instead, they are now charged under international cross-border tariffs, further driving up the costs of each payment.  

And the worst part of all is the lack of transparency. Corporates don’t know how their application to open an international account is progressing, the cost and speed of their payments and the fees for their FX transaction. This lack of transparency also extends to accessing a complete view of exchange rates, payments history and market data, crucial for intelligent decision-making and reporting. 

At a time when supply chain disruptions are rife, agility and speed is key, neither of which are offered through traditional banking partners.  

Technology is disrupting traditional banking relationships 

Where there is opportunity, there is innovation, and this is definitely the case in international banking.  

A new generation of fintechs have created solutions that IT teams can deploy to give CFOs the service they deserve.  

There are a multitude of companies that can expedite the international bank account setup process, with some reducing the time to less than 48 hours. It’s also now possible to avoid disparate accounts and gain a single holistic view of the entire payment and cashflow activity.  

The emergence of virtual wallets is allowing businesses to make same day payments. These, in turn, enable businesses to organise their funds and store multiple currencies, ready for making rapid payments or a currency exchange.  

Many fintechs can now offer up-front pricing and fee transparency, along with the ability to track a payment. One emerging alternative is for businesses to set up their own international account with a multi-currency IBAN in their organisation’s name. As a result, CFOs can manage corporate cash flows and view trading history, market data and statics, all in one place.  

To help address Brexit’s impact on payments and allow cheaper transactions through SEPA, these fintechs are facilitating SMEs setting up EU-based accounts. This means they can avoid having to move existing accounts back into the EU and face the complex, draw-out process of creating an EU business account directly.    

This level of service is the future of international finance. 

Time to reassess traditional banking relationships 

CFOs and finance teams, in collaboration with IT teams, have had to adapt in difficult circumstances to survive. But with further supply chain disruptions expected in 2022, it’s time they look to new technology and the promise of fintechs for answers. 

For too long they’ve been reliant on banking partners focused on keeping the status quo because it’s profitable, and it’s costing them dearly. With all the innovation going on around them, it’s time they start reassessing traditional relationships and exploring new ones with firms which are laser focused on providing them with the tools they need and service they deserve, enabling them to thrive rather than survive the year ahead.

About the Author

Laurent Descout is CEO at Neo. Laurent is a serial fintech entrepreneur and investor and has been a financial advisor in asset finance for more than 10 years. In 2017, he set up Neo, the first European fintech that offers MiFID II-compliant investment services and PSD2-compliant payment services from a single platform, to help SMEs overcome the numerous challenges of international banking.  

Featured image: ©THATREE