Banks See Future as Connectors in Heated Platform Wars

The platform economy is rewriting the business books on vendor-customer relationships. To create new value, many are willing to be both by playing on strengths and potential synergies.

The latest is the joint effort by Standard Chartered and SAP Ariba. Both announced that they are inking a strategic partnership that will see the bank’s financial supply chain solutions sitting on Ariba Network.

For Ariba Network customers, the benefits are apparent. By the end of 2019, they can manage their payments and supply chain finance needs with the SAP Ariba digital platform. “Customers expect the procure-to-pay process to be easy, efficient, comprehensive and seamless, and rightly so,” said Sean Thompson, senior vice president, Business Network and Ecosystem, SAP Ariba and SAP Fieldglass.

For Standard Chartered, it puts their solutions at the fingertips of more than 4.2 million companies in 190 countries. “We’re enabling buyers and suppliers alike to derive more value from SAP Ariba as we enrich their experiences and enable them to manage end-to-end procure-to-pay at its truest sense through Ariba Network,” said Michael Sugirin, head, Open Account and Trade Implementation, Standard Chartered.

It also gives Standard Chartered the data they need to drive SME financing. “With an estimated SME financing gap of USD 5.2 trillion (IFC and the SME Finance Forum), we want to make it easier for these SMEs to get access to not only financing but also other financial solutions,” said Sugirin.

Overall, buyers benefit because they no longer need to “integrate with Standard Chartered to get access to our financial supply chain solutions,” Sugirin said. This saves on IT integration costs, reduces switching costs, increases efficiency and simplifies processes.

Suppliers gain through easier access to financing and transaction visibility. “We’re helping buyers not only embed digitization into their supply chains but also enabling them to foster financial inclusion and to support the sustainable growth of their suppliers (SME financing gap),” he added.

Banks Open to Disruptive Ideas

The strategic alliance shies away from the traditional proprietary approach favored by banks.

“Banks, for instance, have traditionally developed proprietary platforms to meet clients’ financial supply chain needs; however, that has now changed as the world becomes more hyper-connected. As the market evolves toward open banking ecosystems, we’re seeing the emergence of platforms that bring together all parties across the supply chain – from buyers and their suppliers to finance providers on single networks,” said Sugirin.

This changes the role of Standard Chartered. “We see ourselves as a ‘connector’ bank. We acknowledge that our role as a financial intermediary is being redefined and that we need to adapt and evolve with our clients," he said.

Sugirin noted that the deal highlighted the bank’s new approach to open banking and business platforms. He also felt it is inevitable.

“Being a connector is part of our new DNA. As supply chains evolve, we embrace open banking to ensure that we continue to connect business communities while providing simple, seamless access to financial solutions that support their sustainable growth."

Bridging the Platform Gap

Standard Chartered and SAP Ariba are not alone. New strategic alliances are being inked between traditional incumbents when in the past, it involved new vendor services or those of fintechs.

But Sugirin remained unfazed. He sees a significant gap in the scope of many of the platforms. “Unfortunately, most of these platforms only solve for problems within their silo or scope; hence, requiring companies to spend a lot of time, effort, and money in IT integration,” he said.

“We see our collaboration with SAP Ariba to be a huge step towards giving buyers a seamless procure-to-pay experience that also minimizes integration costs for them and boosts efficiencies in their supply chains. By creating more value on Ariba Network, we also help buyers have more of their suppliers move toward a digital network.”

Beyond the Financier Role

Standard Chartered has always kept an eye on innovation. It leveraged blockchain solutions for financing. For example, it uses Ripple for real-time payments and Voltron for digitizing letters of credit. It is also working with fintechs like Linklogis for deep-tier financing, which is financing potential SMEs beyond the first tier.

“This enables us to provide financing to SMEs who often need financing the most – this is something that most banks have always struggled to do,” said Sugirin.

But the bank is looking beyond distributing its products or financing. It sees its current partnership as a first step to giving what its clients want -- intelligent solutions for their challenges.

“Our collaboration goes beyond financing. As we combine Standard Chartered’s treasury expertise with SAP Ariba’s procurement insights, we see ourselves moving beyond just providing products to providing our clients intelligent, comprehensive solutions,” said Sugirin.

“Moreover, with the wealth of data available on Ariba Network, this collaboration gives us an opportunity to explore how we can leverage this data – potentially boosting efficiencies in KYC and in credit underwriting to be able to provide better access to financial services,” he added.