Big data gives financial service providers a competitive advantage. But getting the data will require a closer relationship with commercial clients.
Take JP Morgan Chase. They use credit card information and transactional data to learn about customer spending patterns. Bank of America, too, use big data to understand the cash management problems of its commercial customers.
However, for banks looking to gain a competitive advantage, it’s not simply a question of turning on the big data switch. Because commercial clients have complex client relationships, banks don’t have access to a full picture of a client’s transaction habits. As a result, banks have to look to further imbed themselves in the business processes of a company to obtain corporate data.
In supply chain finance, a bank would traditionally look at a company’s balance sheet to make a credit decision. What is absent, however, is transparency of the client company’s supply chain.
If banks were to have access to data concerning a client’s suppliers or customers, it could track performance and payment history. This would create a stronger basis for making a credit decision.
“The main focus of companies should be to maintain the sustainability of their suppliers rather than eating into their profits,” explains a supply chain manager of a Chinese e-commerce company.
The question for the future is whether companies are willing to grant banks greater access to company data to ensure an end-to-end effective supply chain financing solution.
“It’s about making that data more visible to banks and allowing banks to make credit decisions based on that data,” explains Farooq Siddiqi, MD & global head, trade finance, at Standard Chartered Bank at The Asset’s 3rd Asia Treasury and Trade Summit. “This is what I call true partnership theme.”
Banks have alternatively leveraged on their internal data to create working capital industry benchmarks for their clients use. DBS’s working capital advisory, for example, provides clients with industry averages for days sales outstanding, days inventory outstanding, days payable outstanding, and cash conversion cycle.
