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The digital transformation of supply chain financing: How technology is reshaping the industry

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By Roshan Shah, Co-founder & CEO, VoloFin

In today’s digital-driven times, technology is the backbone of businesses. Establishing a strong tech infrastructure and keeping abreast of technological advancements is the need of the hour. In the world of supply chain financing, digital transformation is revolutionising industry by introducing innovative technologies that streamline processes, improve efficiency, and enhance overall financial visibility.

New technologies like generative AI, automation, data analytics, etc., are reshaping the industry and contributing to making processes faster, more efficient, and more transparent. Eventually, they are paving the way for improving cash flow, reducing risks, and creating stronger, more collaborative supplier-buyer relationships across global supply chains. Several key developments reshaping the industry landscape are:

Supply Chain Visibility and Data Analytics
A lack of end-to-end visibility constrains supply chain financing, thereby increasing risks. However, digital transformation enables real-time visibility into material flows, logistics bottlenecks, and other metrics across the whole ecosystem. Supply chain partners can extract data from various sources and feed it into advanced analytics tools to gain actionable insights. By harnessing big data, supply chain finance can move from a reactive approach to a proactive one.

Gen AI
Generative AI can be a game changer for supply chain management. The new-age technology has the potential to process much larger data sets than the previous forms of Machine Learning. It can also analyze nearly infinite complex sets of variables in the data. The technology constantly learns and teaches itself about the intricacies of any company’s supply chain ecosystem, enabling it to refine and sharpen its analysis over time. Overall, Gen AI can ensure procurement and regulatory compliance, and streamline and enhance the efficiency of operations.

Smart contracts
Smart contracts, powered by blockchain, automate, and self-execute contractual terms with pre-defined terms and conditions. This ensures the automatic execution of financial transactions, reducing the need for intermediaries and minimising delays.

Fintech solutions

Various fintech companies are leveraging technology to offer alternative financial solutions to businesses and are reducing their reliance on conventional channels. These include invoice financing, dynamic discounting, and supply chain finance platforms that connect buyers and suppliers more efficiently and transparently. They provide a myriad of services for clients and lenders, whether it is protecting them against buyer non-payment risk, providing them with collateral-free financing, and a best-in-class in-house proprietary tech platform, or ensuring quick supplier KYC and compliance through extensive integration, the ability to underwrite buyers globally, and providing framework-based lending models with banks. This way, they are relieved from the payment-related hassle and can grow their business. With such innovative offerings, facilitates easy access to capital by offering the right balance between expertise and technology.

Automation and AI in credit scoring
Automated credit scoring systems, often powered by Artificial Intelligence, help assess the credit risk of suppliers more accurately and quickly. This allows financial institutions to make faster decisions and improves the overall efficiency of supply chain financing.

Digital invoicing and payments
The adoption of digital invoicing and payment systems accelerates transaction processing. Transitioning invoices and payments to digital channels, integrated with financing workflows, remove dependence on physical documents and manual processes. Even errors are minimized while processing timeframes shrink through streamlined, transparent electronic management, and the speed of financial transactions between buyers and suppliers is enhanced.

Collaborative platforms
Digital transformation fosters collaborative platforms that unite all supply chain stakeholders, enhancing communication and transparency. Such shared partner ecosystems unite buyers, suppliers, logistics providers, and banks/investors for deeper visibility and seamless interconnectivity. This synergy optimises capital flow, driving efficiency and cooperation in the financing process.

To conclude
The digital transformation is ushering in a new era for supply chain financing. The sector is transforming
on the back of technologies such as blockchain, Gen AI, data analytics, smart contracts, etc. These advancements not only optimise financial processes but also contribute to a more resilient, transparent, and responsive supply chain finance ecosystem. With technological advancements in place, it is projected that a smart supply chain will be the new normal in the future.

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