Business Reporter speaks to Marc Clapasson and Jon Turnes, founding partners of exciting Swiss-based trade finance tech start-up Adamant Lane.
The recent collapse of Greensill has brought attention to the trillion-dollar trade finance industry. We discuss its role, future trends, and how the need for digitisation is vital for confidence and continued growth.
Can you explain the role of trade finance?
MC: Trade finance is a vast finance market – it provides working capital to companies and their supply chains. The events of the past two years have seen massive demand shifts, which have caused trade and demand to change and have squeezed companies and their cashflows. For example, imagine you’re a company that supplies bicycles to bike shops. You might normally supply 10,000 bikes a year – but due to the pandemic, demand from retailers has gone up to 100,000, and your manufacturer wants to be paid 50 per cent upfront. You have the orders, but you don’t have the cash reserves without trade finance or remortgaging your house. You will not be able to fulfil that opportunity and you’ll miss out. Through a number of products, we can help release money from your orders so you can fulfil your obligations, gain some working capital and grow your business – without the loan process and hassle.
JT: Supply Chain Finance is the petrol for growth. It is a trillion-dollar industry that is vital for business and growth. Adamant Lane sits in the tech space enabling businesses to keep up with modern demand shifts in a safe compliant way. We have learnt this is essential.
What needs to be fixed in trade finance?
JT: I don’t think the term fix is correct. Supply chain finance works and has done for decades, but it can improve. Tech has been slow to enter this market, as fragmentation and fragmented are words often used to describe trade finance. We have so many micro-services that go into supply chain finance, and a lot of tech players have looked at the ecosystem and walked away. As we know, when there are gaps in a chain or wall, errors or mistakes can happen as reporting is not linear and risk control is not in real-time. Technology and digitisation across the whole supply chain are what is needed. This is complex as we have legalities, cross border, AML and a lot of box-ticking to deal with to keep supply chain finance programmes funded. We need this to make funders feel comfortable that their exposure to different markets is controlled and having data in real-time is key to that confidence. When we have the confidence of funders, we are able to easily supply finance programs and get money to companies that need it quickly, compliantly and safely.
Recent headlines have shed a negative light on this finance market. Why are these events happening?
MC: As Jon has said, we need a linear end-to-end solution with complete oversight of programs. We see these situations happen as the whole picture is not seen. A company could be reporting 30 days behind and human error and judgement may come into play. People don’t generally make bad decisions by choice – they make these decisions because what is presented to them is not correct. The decision to fund and release capital into a volatile market only happens because the data is out of date. We can’t eliminate all mistakes. However, we can eliminate many with tech, real-time reporting and risk control.
It seems supply chains are being targeted more via cyberattacks and criminality. How does this affect funding?
JT: It mostly depends on where you sit in the supply chain. I think supply chains have had a lot more media attention. Even just ‘supply chains’ being mentioned in the media is relatively new, and that will bring attention to unsavoury elements. However, being able to act quickly is imperative. Funding types probably wouldn’t change, but having a dialogue with funders if you have been affected is essential. Building a resilient and safe network should be a priority.
With supply chains needing to be more dynamic due to COVID-19, has the market changed?
MC: Demand is different now. It pivots very quickly and this puts pressure on supply chains. I think we all know how hard it was to get exercise equipment during lockdown. I believe we will see dramatic spikes in demand for the next few years and business and consumer behaviour is changing.
With corporations becoming more like banks, is this changing the model for external funders and programmes?
JT: Having a happy supply chain is pretty much fundamental for good business, and most progressive corporations see this. We have seen the emergence of supply chain professionals being held more in value today. If companies have a cash pile that they can fund from, it would only be the implementation, risk control and compliance they need to roll out. Using your own capital to fund these programmes will bring obvious cost savings and benefits – large corporations are supporting their own programmes, but it is a tiny percentage.
What can you tell us about Adamant Lane and your roles?
MC: Adamant Lane is the coming together of a great team of experts to build solutions for the trade finance market, with decades of experience working in the finance and tech space. When looking to launch Adamant Lane, we brought our real-world experience in actually being in the market and knowing where Adamant Lane could make efficiencies. It’s an excellent market for funders, and it’s a perfect solution for companies looking to grow. It’s how can we make it better for both sides. We are developing future-proofed solutions that companies can implement with ease.
My role as Chief Growth Officer is to create strategic alliances with funders and service providers, making sure all the necessary services are in the system. Jon, the Chairman, has an extensive legal and commercial background, which has helped massively in making the framework compliant. As a start-up, we are very hands on. Our roles blend into each other and change from day to day based on what the demands are to experience growth. We are very excited about the next few years and already onboarding some major corporations.