Embedded Finance Takes on Supply Chain Challenges

Anecdotal evidence is enough to show just how bad supply chains really have become.

Consider the fact that in just the last few weeks, supply chain dynamics — or lack thereof — have pushed the prices of cars up double-digit percentage points.

The average new car payment is now up to $$1,000 monthly, a record.

Elsewhere, retailers are seeing stockouts, already, which means that goods are late getting to shelves, if at all. It was reported last week that in the U.K. Harrods has postponed its annual sale due to the fact that the retailer’s supply chain is running weeks behind.

You get the picture. Part of the problem lies with the fact that the stubbornly entrenched pandemic still can wreak havoc with staffing. But payments friction, also in the mix, can prove a headwind to efficient handoffs of raw materials and finished goods between buyers and suppliers.

Inflation, of course, is making everything more expensive, and because of that, the interactions between buyers and suppliers, as goods make their way through supply chains, need visibility and transparency. Significant amounts of money are tied up in receivables across the globe, especially where cross-border commerce is concerned. As recently as the end of last year, we  noted that the trade gap — measured in outstanding receivables — stands at $3.1 trillion.

Read more: The $3T Payments ‘Trade Gap’ Can Be Tamed With Better Data, Retooled B2B Platforms

We note that when money is “held” from parties due those funds — either on purpose, as buyers stretch out payment terms, or inadvertently, due to poor data flow — the negative ripple effects reverberate up and down supply chains.

But the consumerization of B2B payments proceeds a pace, which has been discussed — and will continue to be discussed — in these digital pages. In broad strokes, we’ve gotten used to the Uberization of commerce in everyday life, wielding phones and tablets to get things done. And the emergence and popularity of platforms are making it a bit easier for buyers and suppliers to find one another, to lock in of freight forwarding terms, and even use a single click to pay and request payments.

Along the way, the platform models and the emergence of APIs, enabling a more seamless flow of information, and automatic compliance, will gather steam.

In the weeks ahead, as part of this continuing series, we’ll be taking a look at the players and the business models that seek to disrupt the legacy systems and archaic processes that have hampered the physical delivery of goods, and the payments that accompany those deliveries.

The urgency is there. As recently as this week, Conversion Capital Sole Founder and General Partner Christian Lawless remarked to Karen Webster that there is an ongoing  decoupling between China and the U.S., marked by tariffs. The Russia-Ukraine war and surging energy prices have hit supply chains.

Pivoting Along the Supply Chains

China, instead of becoming a solely production-based economy, has become a consumption-based economy. The U.S., by way of contrast, is well on its way to becoming a production-based economy, having roughly 4% of the world’s population but contributing more than 15% of global gross domestic product (GDP).

These pivots will force companies to reconsider how they source and deliver goods and services, which in turn demands that they reconsider payments technology.

And as we’ve found, the avenues that need some attention are readily identified. Companies face two primary problems when making payments to suppliers: invoice reconciliation issues and a lack of supplier portals. PYMNTS has found that 42% of financial institutions cited those activities when they were asked about common problems their corporate clients face when paying suppliers. As many as 15% of the executives surveyed said the inability to offer supplier portals was the most important problem companies confront when paying suppliers, while 9% said the same about reconciling invoices.

In our coverage — yet to come — we’ll shed some light on how supply chains will transform, and get stronger, link by link, with payments and collaboration at the center of it all.

Read also: Easy Invoicing, Supplier Portals Top B2B Payments Wish List