[Gentle music plays ]
So now very quickly about the history of of supply chain
finance. So if we look at the history, we have to look at two
types of of influences; one is of course trade finance, and the
other one is supply chain management. So I don't want to
go into detail about each single step, just very important few
people don't know that it's it's the trade finance is very old
practice so it's research shows that it's about almost 4,000
years old and it was used in Mesopotamia. There was a first
code of of trade and commerce called, so the first rules and
codes of trade and commerce was defined during this period where
basically all the relationships, all the laws in terms of trade
flows were defined almost 4,000 years ago and also during this
time in Mesopotamia there there were traders like importers.
They were buying the goods from companies outside of the region
and what they offer them to kind of rely on a constant supply of
goods, they provided them early payment and the sellers offered
them kind of a promissory note basically a note that they will
promise that they will provide the goods to these importers and
then these notes actually they will that were sold to kind of
the first bankers in history, that were called just writing
quickly the first bankers which were there providing early
payment through these promissory notes they were called Tamkarum.
So they were basically the first bankers in the market and they
facilitated the liquidity and the trade during this period,
and then moving forward few thousand years ahead in ancient
Rome. So trade finance was very important for the growth of the
Roman Empire and actually factoring which is kind of one
part of of of trade finance, basically discounting invoices
for early payment. So factor in Latin means like the who sorry
the one who gets things done. So that's basically where the word
comes from and then later on what is also interesting with
the American colonies. So when the colonies were created in the
US, of course, there was a lot of trade in terms of timber and
cotton and there were long trade flows on the physical supply
chain up to 90 days. So they also required financing
liquidity, so there there was a big increase in terms of trade
finance flows and then throughout the Industrial
Revolution there was even more trade going on and and also a
specific focus on on managing the credit risk, so the risk of
non-payment from from the buyers and then after World War II the
focus was not only on timber and cotton but moved to basically
any kind of industry, any kind of goods which were traded
between different parties. And then in between 1960 and 1980
there were quite some high interest rates especially in
Europe where financing from bank was getting very expensive. So
again there was a big rush and a big growth in terms of these
trade finance practices and today we see that trade finance
is it's almost used in every industry. I just have the latest
data from the the global factoring organization FCI and
currently the total market worldwide is $2.4 trillion okay
in trade finance, which is currently provided by financial
institutions and what is interesting is about 78% is
domestic. So basically where the seller and his clients are in
the same country and the rest 22% is cross-border, and out of
that is about 60% is the market in Europe and about 25% in Asia
and the rest kind of mainly in America. So the Americas is a
very small market and has a huge potential to grow and it's
mainly because I would say the practice of factoring is much
more accepted in Europe than in US still and but there's still a
lot of growth here which we can see in the US. Now specifically
on the history about supply chain finance, so I would say
supply chain finance kind of started really in the 90s late
90s but it's roots can be seen in in 1980s with a company
called with a bank called Santander. So this was a period
again where in Spain interest rates were very high, so
companies were looking at this type of trade finance solution
and Santander created a solution called confirming bancario. So
why this spanglish kind of expression and and then also
fairly I mean a few years later Fiat the Italian auto
manufacturer started supply chain finance programs, then
Carrefour the French retailer and Metro Group the German
retailer in the late 90s and then basically there was a big
push then from the automotive sector and the retailer's to
implement these programs in the early early 2000. So a question
do you do you know why or do you what are you think are the
reasons why the retail in automotive sector? So so
basically the retailers they are not I mean today there are some
exceptions but mainly retailers are mainly buying stuff and then
just reselling it. So they're not manufacturing anything, so
they are heavily depending on their suppliers and the constant
flow of supplies. This is why supply chain finance which is
focusing mainly on large buying organizations and their
suppliers was a big focus for their for the retailers and also
they couldn't improve or still now I mean they get paid at the
moment when you as a client you buy the products. So there is no
problem of waiting so today of getting paid, you get paid
straightaway. So the key improvement was the warehouse.
So the physical supply chain and also managing their suppliers.
Then the automotive sector is basically because there's so
much competition there and with especially with Toyota the
Japanese manufacturers, they were highly efficient like like
just in time. So they key point was after how to improve their
financial supply chain and today we can basically see this kind
of solutions in almost in almost every industry. So just recently
as I saw airline industries like Lufthansa, Etihad setting up
these programs and mining companies, all the food and
beverage companies; mainly all the manufacturing companies. So
it's it's widespread solution which is used by many global
leading institutions.