Orbian’s orbit: 25 years as a leader in supply chain finance
Founded in 1999 as a joint venture between Citibank and SAP, Orbian was one of the first companies to develop supply chain finance. Since then, it has seen phenomenal growth, becoming a privately held company and, through its state-of-the-art technology platform, evolving from a technology provider to a financial services provider in its own right. Orbian’s chairman, Thomas Dunn, reflects on the company’s journey to date and what the future has in store.
Q: How has Orbian made its mark on the industry and what have been the company’s biggest achievements?
Dunn: Orbian has always strived to be at the leading edge of supply chain finance (SCF) and to enhance the processes that underpin it for the benefit of our clients and the industry. We evidence this in many ways through our core operations, but one area that sets us apart is our unwavering commitment to research. We firmly believe that having a behavioural understanding of SCF and its practices is key to being able to optimise industry developments. We’ve had an enduring partnership with the Technical University of Munich for nearly 15 years, and now have similar collaborations with a number of US institutions. These relationships allow us to explore and work with experts on important topics such as cognitive bias within SCF, and gather rich industry insights and intelligence that we use to shape our solutions, innovations and investments. We then are able to capture economic advantages from that research. This strategy has been a differentiator for us from the start, and is one we’d be eager for others in the industry to adopt.
A specific standout moment for us is receiving a King’s Award this year for Enterprise in International Trade. Being selected for these awards, which celebrate outstanding achievements and innovations by UK businesses and are internationally recognised, is a reflection of how far we’ve come over the past quarter of a century. I was honoured to attend a presentation ceremony at Windsor Castle in July – a thrilling experience that reinforced how proud I am of what we have achieved with Orbian.
Q: What are the most notable challenges that the industry has faced over the past 25 years?
Dunn: I’d say there are three big ones. Firstly, the 2008 financial crisis, which continues to have lasting direct and indirect impacts on SCF, particularly with respect to regulation and the costs and complexities of compliance. Secondly, the situation with Greensill Capital threw SCF unfairly into a negative light and meant the rest of the industry – credible, legitimate and trusted businesses – were forced to pick up the pieces, stepping in to support with funding and ensuring the reputation of SCF was restored. Thankfully, this has been achieved. The biggest challenge that the industry now faces is the impact of huge interest rate increases, going back to 2022. Until recently, interest rates were effectively zero, meaning that working capital was available to many businesses almost for free. Now, with costs around 5-8% a year, that’s having a very material effect on the ability of corporates to utilise their working capital, and on the ability to maintain growth of the asset base within SCF programmes.
Q: How can Orbian’s solutions and capabilities provide support to clients in challenging times such as these?
Dunn: Orbian has a number of key pillars upon which we support clients. The first is our funding model, which ensures SCF programmes are never dependent upon any one funder, thereby removing the risk of disruption to a single funding source for suppliers. This relies on us having the capacity to run our own multibillion-dollar balance sheet.
The second is using our research into SCF behaviour to create a set of risk management protocols for ourselves, allowing us to offer suppliers fixed interest rate management tools that are unique to the market, with customers able to be fully hedged for contractual periods ranging from six months to five years.
The third is our unique Express SCF offer that makes use of e-money, which enables us to offer SCF to all suppliers in a programme. Most banks have minimum thresholds for supplier size before they will engage them in a programme, but Orbian’s solution means the smallest suppliers – still very much vital COGS within a supply chain – can benefit from early payment and accelerated liquidity. For corporates, this approach of looking after smaller, community-based, quite possibly minority-owned businesses – just as effectively as they look after giant companies – provides supply chain security and contributes to their ESG strategies.
Q: On that note, what is the role of SCF in facilitating ESG initiatives, the green transition and the sustainable future more broadly? How are you supporting clients in that respect?
Dunn: We’ve seen arrangements where suppliers’ costs of finance are reduced if they meet ESG objectives, and increase if they don’t. But that’s far from the sum of what SCF can do for ESG. Making a true difference isn’t about fractional changes in suppliers’ cost of funds. Instead, it’s about ensuring that SCF is positioned to deliver real, substantial funding – billions of dollars – into the initiatives required to drive the sustainable transition. Much of any backlash regarding ESG is the idea that it translates into increased costs for consumers. But with SCF, we’ve got to demonstrate that our solutions aren’t a stealth tax, nor stealth profiteering dressed up as a good initiative; they are compelling solutions in their own right. This comes from focusing on the industries that can make a difference, like renewables. We are the largest provider of supplier financing in the renewable energy industry in the world, and we’re looking to apply the same suite of services and tools to adjacent industries.
Q: How do you see the SCF landscape evolving? What are the key areas for improvement and how can they be addressed?
Dunn: Insurance companies will become the majority funders of SCF programmes, likely in the next five years or so, while banks will become more ‘seasonal providers’ of liquidity. With SCF programmes paying a US dollar interest return on average of 6% per annum, plus the fact that losses on SCF are almost nil, SCF is an attractive asset class for an insurance company. Moreover, even though programme durations are usually less than a year, assets are constantly being renewed, thereby allowing insurers to take a five-year view on the programme. And earning 6% on these assets for five years or more is a good place to deploy capital. Orbian has already seen growing participation from insurers in purchasing the funding notes we issue.
Separately, I think there’ll be greater industry consolidation. RFPs now typically involve about 30 different participants, making the decision-making process challenging for corporate treasurers. Consequently, price can become an overinflated – or even the single – point of differentiation. Moreover, with competition stiff and a lack of published data about SCF activities, the degree of overinflated self-claims made by participants is astonishing. This needs to change.
Q: Finally, what does success mean to the company? What would you ultimately like Orbian help the industry to achieve?
Dunn: Our vision is for SCF to evolve from being a relatively niche piece of the working capital puzzle, to an end-to-end working capital optimisation tool. Ultimately, both buyers and suppliers will have the control and flexibility to seamlessly and independently ‘toggle’ how and when they make and receive payments, depending on their individual working capital requirements at any given time. In effect, suppliers would be able to choose to receive and pay for accelerated payments only when they need to; likewise, buyers would have the ability to defer payments, but also to pay early and capture early payment discounts, according to their needs. This is at the heart of the innovation that Orbian is striving to achieve.
As part of this, we’ve established two key, strategic partnerships: with TransactPay, a fully licensed, highly regulated e-money provider, and generative AI company Calculum. These powerful collaborations are allowing us to leapfrog some of the other technical innovations taking place in the industry – and take a step closer to delivering the ability for working capital to be truly optimised in this way.
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