SAP announced last week that it will be acquiring a controlling stake in the capital management company Taulia. This move confirms what Aite-Novarica Group recently discussed in its report Bank-Friendly Supply Chain Finance Platforms: An Innovative Approach.
SCF platform vendors must integrate their platform solution using API connectors to share data with bank partners. Banks must set up tight partnerships with fintech vendors that follow the strategy of building a platform friendly to their banking partners.
Innovative SCF platforms create cloud-based ecosystems of best-of-breed players. The offered services enhance incumbent SCF platforms’ capabilities, providing treasury and finance teams with a decision-support system to optimize the enterprise working capital.
Corporate treasurers expect to run their operations from their primary workbench: the ERP or the treasury management system. SAP can now strongly secure this capability. While this announcement obviously has benefits, it will also have some consequences that corporate users, bank product managers, and other SCF vendors must be aware of.
- For corporate users:
The SAP and Taulia proposition will remain of interest to very large corporations that act as anchor buyers and run SAP as their main ERP solution. The native integration into SAP’s ERP and Business Network solution portfolio builds the decision-making cockpit that Aite-Novarica Group predicted in the previously mentioned report.
SAP considers Taulia a market leader in the buyer-led SCF market. This will leave the supplier-led market—typically made of small-medium enterprises (SMEs)—out of the picture, apart from those SMEs that will be brought into an SCF program by their anchor-buyer clients.
- For bank product managers:
A bank that wants to regain control of its customers’ data will likely decide to directly control its SCF activities. This type of bank also realizes that it must rely on a fintech partner to do so, with the partner running the “tech” side of the equation and the bank tightly holding the “fin” strategy and proposition.
The expected result of this partnership is a multi-bank platform model with member banks empowered to keep control of their corporate clients’ SCF data, moving from being solely providers of funds to becoming advisors and enablers of the client’s supply chain strategy for resilience. SAP’s proposition to become the working capital management leader through more direct control over Taulia makes this more difficult, as it inevitably relegates banks to the role of funding sources.
The announcement from SAP says, “SAP will invite additional financial institutions to run their clients’ working capital management business on the platform,” but the evidence is that corporate customers’ SCF transaction data will remain confined within the SAP and Taulia platform. The acquisition also supports suspicions that Taulia’s model of an independent-buyer-centric SCF platform tailored for large corporations cannot scale sufficiently without the direct (and financially interested) support of corporate-centric partners (SAP, in this case).
- For SCF vendors:
This will cede ground to SCF vendors that deploy cloud-based platforms to build a marketplace-like ecosystem of buyers, suppliers, logistics service providers, fintech developers, and—of course—financial service providers (e.g., banks, insurance companies, credit risk management providers).
The tech solution will be a service in the hands of financial institutions that can keep visibility of their clients’ SCF operations (with the given permissions) even when that client is running an SCF scheme with some other financial institution in the marketplace.
The entire SCF ecosystem will be impacted by this deal, but steps can be taken to ensure a positive impact. Corporate users should select SCF partners that allow them to run all operations on their enterprise system (e.g., ERP or TMS).
Banks should set up tight partnerships with fintech vendors that follow the strategy of building a platform friendly to their banking partners. And fintech vendors should develop solutions that generate real business opportunities for banks while ensuring that SCF solutions reduce both operational costs and credit risks for bank adopters.
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