At a time when supply-chain finance startups increasingly are encroaching on trade finance by traditional banks, some banks are turning to an untraditional approach: hiring a startup. Mizuho Financial Group announced this month that it has cut a deal with PrimeRevenue to provide supply chain finance solutions to the bank’s clients, The C Suite reported.
The Tokyo-based bank, one of the 20 largest in the world, plans to roll out the platform for its clients by the end of 2014.
Privately held PrimeRevenue, which was founded in 2003 and was still doing funding rounds as recently as 2010, will also give the bank access to the 15,000 corporate clients already using its platform.
Under the deal, Mizuho will provide financing, while PrimeRevenue provides client metrics on working capital and cash flow to the bank, while also functioning as a service provider to borrowers, handling supplier onboarding as well as support for Know Your Customer requirements and allowing multiple funding sources.
Mizuho also gains something that has been touted as the biggest advantage of many supply-chain finance startups: fast-tracked approvals for trade finance loans. PrimeRevenue handles much of the approval process and sets terms for financing. However, PrimeRevenue doesn’t function as an auction platform, which lets the bank maintain closer ongoing ties with its clients. Money flows also go directly to the bank.
Along with specific support for supply chain financing, PrimeRevenue also has alliances with providers of other related services such as e-invoicing. Along with Mizuho, the platform supports more than 50 other funding sources.
The shift to outsourcing much of the supply-chain finance mechanics doesn’t represent a complete overhaul of the bank’s trade finance operations. Mizuho’s Junichiro Yoshiyama, senior VP for trade finance, called supply-chain finance “one our key pillars in our trade finance product suite” and said the PrimeRevenue deal “represents a new era in financing of existing and new clients,” but stopped short of suggesting a revolution for the bank.
Still, using an outside platform as a way of handling many multifunder and regulatory complexities is likely to make the bank feel more like a startup to corporates, who need both traditional trade financing and more flexibility than big banks have been able to provide easily in the past. The ability to plug in additional services and coordinate multiple funding sources, while avoiding many competitive and regulatory hurdles, could make many of the advantages of the current round of trade-finance startups irrelevant. That, in turn, will likely push the startups into a new round of innovation.