October 14, 2019

By TSL Express


CliveIsenberg_Octet
In September, Octet announced that Bank of Queensland partnered with Octet on supply chain financing. For the press release, please
click here.

Octet’s unique technology-driven finance offering has secured a partnership agreement to provide B2B supply chain finance products to the Bank of Queensland. In the first phase of this ground-breaking arrangement, Bank of Queensland will transfer its existing debtor finance business effective immediately, with Octet assuming responsibility for all the Bank’s debtor finance clients across Australia. As part of this relationship, Bank of Queensland will be providing a funding warehouse to Octet.

Octet, an Australian supply chain finance specialist with more than $2 billion in annual transactions, will seek to expand the partnership through integrating its suite of innovative SME supply chain finance solutions within the Bank.

The Octet-Bank of Queensland partnership is the first time Octet has aligned with a traditional lender in the business finance market. The deal sets a new standard for collaboration between the fintech and mainstream banking sectors.

The new arrangement adds significant momentum to Octet’s growth and represents a key milestone

in its efforts to broaden its foothold within the Australian SME market. The expanded debtor finance business will complement Octet’s growing and unrivalled suite of B2B supply chain finance offerings

TSL Express caught up with Octet Chief Executive Officer, Clive Isenberg.

We are seeing an emerging new trend of fintechs collaborating with traditional financial institutions on supply chain financing solutions. What impact will this have? Can we expect to see disruption of supply chain finance through bank-fintech partnerships?

Isenberg: Most engagements and collaboration with traditional financial institutions to date have typically been one-dimensional partnerships, where only a specific product or service is considered under a distribution model.

Supply chain finance is far more broad-reaching and services the full gamut of working capital finance. From our perspective, the cornerstone of supply chain financing includes support for both procurement (purchasing for the purpose of resale) and for selling (bringing in cash flow from receivables).

Octet is taking this a significant step further by creating a unique closed community of members and opening channels to allow them to transact with one another, powered by using their own liquidity and/or capital, or alternatively tapping into Octet products at the point of sale.

We are increasingly seeing businesses seeking providers that can solve problems and streamline their financing. This means providing a single destination for all business finance and working capital requirements, rather than separately engaging multiple providers to cater for each element in order to address all their needs.

Our recent deal with one of Australia’s largest banks helps meet this demand. It sets a new standard for collaboration between the fintech and mainstream banking sectors. We’re leveraging technology to centralise business finance and payments so our clients can carry out all their business supply chain transactions within a single platform.

Industry commentators have seemingly reached a consensus about a global trade finance gap in the order of $1.5 trillion. What role does supply chain finance play in filling that gap? What strategies can be deployed to address it?

Isenberg: Supply chain finance is playing an increasingly important role in this area. Essentially supply chain finance is funded by sellers accepting a discount in order to receive funds early on their sales and backed by the creditworthiness of the buyer. While supply chain finance is a key tool to close this trade gap, it cannot do it alone as it relies upon transactions that involve larger buyers. Other products and capabilities in the supply chain, including trade finance and receivable finance, work in unison to close the gap and the combined impact of all of these funding sources makes a material difference to the global trade finance gap. Assisting clients in developing a seamless management and financing experience across the entire supply chain will nurture demand for these innovative financing options. The size of the potential opportunity is huge, if we continue to focus on serving the needs of the businesses. Understanding customers and tailoring solutions to suit their evolving needs has been crucial to our success.

What role is technology playing in helping to address supply chain finance challenges faced by both financiers and corporates?

Isenberg: Octet has developed a secure international supply chain platform for the benefit of both buyers and sellers. Innovation is in our DNA.  We are now focused on building a global multilingual B2B member community and servicing the needs of that community. To do this, we invest heavily in security to instil and maintain trust across members and develop tools that continually improve the process that underlies supply chain financing. First-class technology is key to our success. Outside of Octet, many businesses typically rely on paper-based models, where there is no single source of truth, which provides an unnecessary distraction to all parties.

Octet centralizes business finance by allowing members to transact in one place and store all critical source documents together as a source of truth. Transactions are funded using either the members’ own capital sources or Octet providing funding at the point of sale. We invest into simplicity and erasing the friction that is common in typical supply chain transactions, particularly cross-border dealings.

What are some supply chain financing challenges particular to the Australian market that might not be seen so often in other markets? Where do you see potential for growth in supply chain financing?

Isenberg: Most markets understand supply chain financing as ‘reverse factoring’, which we interpret as a specific subset of supply chain financing. Reverse factoring is a product that enables smaller suppliers to access early payment credit off the back of a stronger creditworthy buyer. Typically, we only see this at the top end of the market, catering for larger organisations.

There is an enormous gap in servicing the small and mid-market of Australia, and this is where the opportunity lies. What is not widely appreciated is that at an aggregate level, the scale of the SME market is actually bigger than the large market alone. That’s why it is significant.

Most small and mid-size businesses are unable to access the supply chain financing tools and technology often afforded to larger buying business, which is something Octet provides to all clients regardless of size to democratise the supply chain.

Australia’s huge trade links across the Asia-Pacific opened up enormous opportunities for Australian businesses and Octet’s value proposition was underpinned by a goal to help local businesses purchase from SME suppliers.  

Our priority was on financing and managing the supply chain by bringing together multiple financial sources to maximise business opportunities for both buyers and sellers of all shapes and sizes. It’s now clear that this provides a global platform for growth opportunities as understanding grows about the potential of supply chain financing. We already have established operating entities in Europe, concentrating on our Payments solutions (part of the Octet network), while the US will be our next critical focus for expansion. It is important in terms of closing the US segment of the Asia-Pacific trade loop for SMEs. That will represent a fundamental change to our network.

Clive Isenberg bio: Clive started Scottish Pacific Business Finance Pty Ltd in 1988, which specialized in working capital finance and trade finance specifically for Australian and New Zealand SME’s. In 1991 Bank of Scotland bought into Scottish Pacific Business Finance, which was their first acquisition in Australia. Bank of Scotland sold out of Scottish Pacific Business Finance Pty Ltd in 1997.

In 1998 under the guidance of Clive, Scottish Pacific Business Finance became the first receivable financier to set up a SPV for securitising it’s SME exposures.

By the time Clive sold his company to Westpac Banking Group in 2000, Scottish Pacific Business Finance’s SME turnover volumes exceeded US$4 billion per annum and was the largest Factoring and Invoice Discounting organisation in the southern hemisphere as well as the largest privately-owned receivable financing company in the world.

Clive joined the board of the global network of receivable financiers, Factors Chain International (FCI) in 1994 and became the Chairman for two years and continued to be on the board of the association/network until July 2014. The association has over 400 bank members in 75 different countries and represents more than 90% of the worlds receivable finance volumes, which currently exceeds US$3 Trillion per annum.

Clive was the founder and past chairman of the Institute for Factors and Discounters of Australia and New Zealand, now known as the Debtor and Invoice Finance Association (DIFA). The organisation was formed in 1994 to represent the major providers of the debtor finance market. DIFA promoted the importance of the debtor finance industry to small and medium-sized enterprises (SME’s), trade associations, professional and government bodies.

Clive also spent many years as a Director of Bank of Scotland’s investments in Australia including Bank of Western Australia Holdings Ltd and Capital Finance Ltd.

From 2004 to 2011 Clive served as a non-executive Director of The National Hire Group, which had a 46% interest in Coates Hire Ltd, an Australian general equipment hire company. While there he occupied the roles of Chairman of the Audit Committee, Member of Nomination Committee and Chairman of Remuneration Committee. Clive oversaw National Hire Group’s acquisition of both Allight Holdings Pty Ltd and Sykes Group.

Clive later managed, as an independent non executive director, the business’ acquisition of the Coates Hire Limited business, making National Hire with Allight, the largest hire company in Australia and 6th largest hire firm in the world

Clive established the Octet Group in 2008 which provides technology to global financial institutions specialising in supply chain financing. Clive then introduced Octet Finance Pty Ltd as a financial institution into the Octet Group to provide a complete offering of finance to SME’s for their entire supply chain, utilising Octet’s unique closed community Platform.

In August 2018 Clive successfully completed a $100 million securitisation program for Octet Finance Pty Ltd. Note funders were Westpac Bank and Challenger Group. More recently this program has expanded to $150 million.

In August 2019, Clive oversaw the acquisition of Bank of Queensland’s Debtor Finance portfolio and effective partnership arrangement to deploy our non-competing supply chain finance solutions across the BoQ network.

 


About the Author

TSL Express is published daily by Secured Finance Network.