Supply chain finance has always been crucial in creating working capital solutions for companies. However, as established supply chains are buffeted by events such as COVID-19 or structural shifts caused by the impact of US tariffs, supply chain finance will play an increasingly crucial role in facilitating negotiations and enabling trade.

At the 51st Annual International Trade and Forfaiting Association’s (ITFA) Conference in Singapore, Mahika Ravi Shankar, Deputy Editor at Trade Finance Global (TFG), sat down with Natasha Condon, Global Head of Trade Sales at JP Morgan, to discuss how supply chain finance can build resilience for businesses. 

Building resilience in supply chains

Supply chain finance plays a crucial role in building business resilience by unlocking liquidity. It creates a working capital buffer by ensuring that sellers get paid as quickly as possible and buyers can pay as late as possible. 

This is especially important for SMEs: supply chain finance is often a key source of liquidity for  “smaller supplier[s] who might not be able to access that funding, certainly not at that price, against their own bank lines,” Condon explained. 

Beyond creating access to working capital, supply chain finance also plays a vital role in commercial negotiations. In the current climate of uncertainty and supply chain disruption, supply chain finance is acting as a negotiation tool, “helping the wheels of commerce to turn in difficult times,” said Condon. 

To cope with the uncertainty, companies of all sizes are focusing on increasing liquidity, a crucial tool for resilience. Easy comparisons to two crises of recent times – the Covid-19 pandemic and 2008 – don’t capture the whole of the story (Covid, for example, was a time-limited shock more than a structural one), but lessons from 2008 are still being played out, said Condon. “People are making sure they’ve got a bit of extra cash in their pocket so that if something changes overnight, they’re ready to cope with it.”

Technology and digitisation

Technology has focused on improving ease, cohesiveness, and integration of trade finance solutions, from early payment options to dynamic discounting. “The really interesting developments on that side are very much around bringing down barriers to entry, making it easier for people to use the product,” said Condon. 

One of the most talked-about new frontiers is the tokenisation of real-world assets. A 2024 study by Bainn and JP Morgan’s Kinexys estimated tokenisation could become a nearly £300 billion market in the next few years if its opportunities are leveraged well. Tokenised assets can provide transparency, liquidity, and easier access, creating opportunities to collaborate with partners who might not otherwise be interested in the complexities of financial assets. 

“If there are ways that I can use our technology advantage to bring in more funding partners to collaborate better with the banks who are at this conference, among others, to provide a better solution to my corporate clients, that’s a win for everybody involved”, said Condon.

Consolidation pressures 

Despite all their benefits and efficiency gains, near-constant technological developments risk leaving cash-strapped SMEs behind.

“You need deep pockets to make sure you are keeping up with the pace of innovation and the tech spend that is required. [On top of that] there are compliance costs, there are regulatory costs, there are complexities that are getting greater every day,” said Condon.

Recent US tariff developments have exacerbated the trade finance gap and made it even harder for SMEs to keep up. The volatility and unpredictability introduced into the market have resulted in higher insurance costs, compliance costs, and collateral costs, as well as stricter credit terms. 

Trade finance is a “historically fragmented industry,” and especially amid rising costs, banks may become increasingly wary of  “maintain[ing] an expensive international network” in the long term, said Condon.

“I wonder whether in the future we are heading towards an industry structure where you have these incredibly strong local and regional banks with deep, deep relationships with their corporates in specific markets.” 

Then, “the banks that choose to, who’ve got the ability to run that international network, work with those partners to connect them to the other end of the trade transaction,” said Condon.

Industry developments in the last two decades have converged to create  “a very clear macro pressure towards consolidation”, which “is going to change the way we all work together,” said Condon.

The future of supply chain finance

Looking towards 2050, the goal is  “a world in which trade finance looks a little bit more like cash in terms of being smooth, digital, embedded, integrated, tokenised, liquid,” said Condon.

As more and more aspects of banking – from customer support to cross-border payments – become easily embedded for clients, trade finance solutions will be the next frontier. Trade finance already has receivable solutions, but by 2050, the hope is for a “breadth across the working capital cycle”, including “payable solutions on the supply chain finance side,” said Condon.