Digitalisation is creating huge opportunity in the world of open account trade finance. Market leading platforms enable complex supply chain finance transactions to run efficiently using straight through processing, removing manual steps which have held back uptake and increased operational risk.
The need to be flexible
For these programmes to run on platforms, data must be automatically extracted from customers’ ERP systems and transferred. This poses a challenge: no single ERP dominates the market, with market penetration varying by customer size, geography and sector. This means that for global banks, their SCF platform needs to be able to rapidly ingest data from multiple different ERP sources.
A modern SCF platform, therefore, needs to support easy interfacing with clients’ ERP data, be ERP-agnostic and be flexible to the way the client wishes to share the data.
How it works today
The way customers currently share the ERP data with banks can be grouped into five distinct channels:
- Email: A bank’s client emails a spreadsheet of ERP data to an internal bank operations team that uploads the data.
- Manual upload: A client manually uploads spreadsheets through a bank’s website.
- ERP script: A client creates a script to push data to a platform via a Host-to-Host file transfer (e.g., SFTP).
- ERP extractors: software is installed on a workstation within the client’s finance department and utilises their login to pull relevant data that the user can access (e.g., invoices, credit notes, and management accounts), and push it to a platform.
- ERP Plugins: a more sophisticated version of an extractor which uses approved code that is installed within authorised name space within the ERP to push data to the platform.
How it will work tomorrow
The Demica Platform can support each of the five channels used today. However, we believe the long-term future of large corporate ERP connectivity will be APIs, as SAP and Oracle clients migrate to S/4 and Fusion respectively, and this is where Demica is investing. The chart below shows SAP migration progress to S/4 Hana, which shows that over 70% of the Americas SAP User Group (ASUG) is intending to move to an API-ready ERP. This has the potential to make Plugins a niche technology that will be skipped by most clients who will remain on Host-to-Host until they are in an API-ready ERP.
However, clients are moving from file transfer to API at very different paces, due to two specific issues. Firstly, differing internal technology capabilities and varying levels of concern over information security. Secondly, acquisitions that mean even the most sophisticated large clients will always have subsidiaries on older, different ERPs.
Demica’s strategy for the future is built around Microsoft Azure API gateways. Mastercard, our first client using APIs only to submit invoices/credit notes, transact and trigger payments, went live in 2021. To deliver this solution we worked closely with Mastercard to understand requirements, then development and QA took approximately eight weeks which included setting up the Azure API gateway.
Freddie joined Demica in 2016 from funds network Calastone, where he was previously Operations Director. With 9 years of experience in customer service and technology operations, Freddie is responsible for delivering global support to Demica’s clients and ensuring the availability and resilience of Demica’s platform.