In the ongoing drive to help businesses access new sources of capital, Mastercard has launched today (Oct. 21) a new B2B supply chain finance offering as part of its Track Business Payment Service. Mastercard’s Senior Vice President of Commercial and B2B Solutions David Trecker told Karen Webster that the program is not just about providing access to capital but doing it at a price that makes sense for suppliers. Mastercard has partnered with Demica, one of the world’s largest working-capital financial technology firms.
Starting in North America (the U.S. and Canada) and then expanding next year, the program will enable suppliers to leverage reverse factoring, approved payables finance and similar programs and benefit from improved access to competitively priced early payments, one-time enrollment and standard agreements.
In addition to filling the working capital void for suppliers without any access to supplier financing tools, Trecker said the solution would help those with access get better pricing when discount rates are based solely on the supplier’s credit quality and not the willingness to pay of the buyer.
“[In traditional settings] the buyer is not getting a working capital benefit and the suppliers are not getting the financing and no one’s happy,” he said.
Joining Mastercard’s Track Network
Trecker said that the supply chain finance feature is an opportunity to get new players into Mastercard’s Track BPS while servicing those who have already enrolled.
Read more: Mastercard Rolls Out Track Business Payment Service In US
He sees initial demand coming from a variety of players — ranging from a consumer goods company with 50,000 suppliers that has only onboarded a “couple hundred” suppliers with its existing supply chain finance program to freight and logistics players for whom current supply chain frictions only underscore the need for better and more immediate sources of working capital.
With the new offering, Mastercard hopes to get suppliers paid earlier than what is currently the norm, using a unique model that is rules-driven. Suppliers will be able to set the parameters around which invoices — when and for what amount — they might want to expedite payments.
“Whether getting paid earlier is a lifeline or dry powder, suppliers should have the choice to decide how valuable that is any point in time — and choose to ‘turn the spigot on and off,’” Trecker said.
Part of the value of Track BPS, he said, is being part of a network that standardizes how information is shared and how risk is assessed. With that information, it would be easy to determine who to finance, when financing is available, at what price and through whom.
Access to that data will drive better outcomes and more innovation in supplier finance, including starting to finance earlier. That’s what the industry needs and “absolutely” where Mastercard would like to go.
“[To meet] the needs of a supplier whose cash conversion cycle starts long before an approved invoice,” he explained.
Consolidation is Key
Today’s launch follows a test that Trecker said uncovered some interesting takeaways. The days of selling supply chain finance or virtual cards on a standalone basis “are increasingly behind us,” Trecker said, adding that industries are “intertwined,” and they all have the same constraints, boiling down to acceptance. The separate networks that banks have for cards and SCF need to be joined together to minimize the inefficiency and the resulting “higher costs.”
Consolidating information is what will yield results, he said, adding, “Let’s stop having little micro, closed loop networks, [and] little islands of data. If you can actually bring this together you can do things you simply can’t do today.”
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