Just Do it – a case study of SCF in China

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By FINTECH Books Contributor, Allen Chen

Supply chain finance (SCF) is set to optimize cash flow of a firm.Traditionally, most companies aim to create direct links to insurance companies while others seek to purchase credit insurance from financial institutions.

However,the lack of credit and the high borrowing cost are becoming more relevant for companies to consider after the 2008 credit crisis.The crisis has boosted the development of supply chain financing solutions in the recent years. Thus, various institutions and parties have been pushing forward innovative ideas and concepts to resolve and reduce risk and improve liquidity situation via FinTech/InsurTech.

However, many organizations have been embracing and advocating the concepts of blockchains or internet of things, but yet to action on those blue prints and initiatives.Without proven feasibility and scalabilities, exaggerating the potential impact of those technologies could, in turn, damage the prospects and development.

Unlike many developed countries, China’s political structure,regulatory hierarchy and stimulus policies have provided greater incentives and supports to cultivate the collaboration and participation of various parties. For instance, investments into supply chain financing Fintech solutions can be found among well-known companies such as Alibaba and JD. com, or giant MA funds such as Asia Fintech FOF, a 10-billion-yuan.Is this unique to China?

Not necessarily. Some experts are convinced that InsurTech programs have to be partnered with global Fintech communities, banks, and governments to access credit capacity, regulated ecosystem and funding for new InsurTech programs.But no one has achieved any significant actions, just yet.

In a nutshell, post-financial crisis has created spaces for new entrants to provide financing solutions, combined with cutting edge technologies to gain comparative advantages against established insurance processes. What those InsurTech programs desperately need are not just technology-driven syndicates or out-of-the-magic-hat tricks, but collaborations across various parties on industry consensus,program funding,actual implementations and experiments of insurance technologies.