LONDON — On one side sat Christian Lanng, the Danish founder of Tradeshift, wearing bright blue shoes, a dark jacket over a black t-shirt, and a baseball cap with futuristic symbols on it.
Opposite him sat Vivek Ramachandran, HSBC’s global head of propositions and trade & receivables finance, in a full suit, tie, and smart black shoes.
The contrast at Thursday’s press conference — jokingly referenced by Ramachandran at the start — was the perfect picture of the culture clash in global finance right now. Technology is reinventing finance and incumbents are increasingly turning to startup to help them navigate the change.
HSBC announced on Thursday that it is partnering with Tradeshift to offer working capital to companies that use its platform. Tradeshift offers a cloud-based software platform to help companies keep track on their entire supply chain in one place. Lanng likened it to Facebook, connecting up all companies that do business together, directly or indirectly, in one place. Founded in 2010, it already has over 1.5 million companies connected to its platform on both the buy and supply side and processes $US500 billion in trade over its platform each year.
Ramachandran called the tie-up with Tradeshift “genuinely game changing in terms of supply chain finance” as it allows HSBC to lend to people much further down the chain.
Usually, banks will only offer working capital — the money needed to fund the fulfilment of big orders and contracts — to businesses with direct contracts with a large company. What if that supplier itself needs to buy its raw materials from another company? The supplier to the supplier — and often the chain stretches longer — could struggle to get financing.
Tradeshift’s platform allows the banks to see the whole chain, giving them more confidence to lend. The bank can see that order trail ultimately leads back to a big corporate like, say, Tesco or Unilever. HSBC were so taken with the product that they invested an undisclosed sum in the company last year. Santander is also an investor.
Ramachandran said on Thursday: “With the data we get from the platform, we can actually lend to the supplier knowing if they have a contract the buyer, or if they have a purchase order, we know the track record of payments and can see if they have an approved invoice.”
Lanng likened the partnership to “bringing virtual [bank] branches to where the trade is.” He praised HSBC as a partner, saying it was one of the few banks with the reach to satisfy the finance demands of Tradeshift’s customers globally.
Banks are increasingly teaming up with startups
HSBC is not alone in partnering with a fintech startup to help offer new digital services to clients. Santander has partnered with US online lender Kabbage. JPMorgan has inked a similar deal with online loan provider OnDeck.
And this week Barclays announced it has begun working with a startup ClauseMatch to help it manage compliance and workflow globally. ClauseMatch has been part of Barclays’ global accelerator programme.
Fintech has exploded around the world since the 2008 financial crisis, due to a combination of cheap capital, finance professionals finding themselves unmotivated or out of work, and advances in things like cloud computing and machine learning.
Big banks initially saw fintech startups as pesky flies on the back of the corporate elephant. They then emerged as potential competitors. But increasingly incumbents are viewing startups as sherpas who can help guide them to a digital future.
Dirk Klee, the COO of UBS’ Wealth Management arm, told Business Insider in February: “We as incumbents, we have long moved on to a full collaboration model.
“We are embracing fintechs and actually we believe that there is great innovation. We need to find very smart ways to partner up and improve our existing business model.”
The Tradeshift partnership allows HSBC to do just that, stretching deeper into the supply chain than it could before to offer finance.
HSBC’s partnership with Tradeshift, which is available through Tradeshift’s platform, will be soft launched to European corporates from July, although finance will be offered to suppliers globally. HSBC plans to expand the partnership in 2018.
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