Deutsche Bank is joining the supply chain finance platform Traxpay. The contracts were signed on July 24th in Frankfurt, as the two companies announced. The parties did not comment on the financial terms of the deal. According to reports, however, Deutsche Bank has bought a stake of less than 10 percent in the Frankfurt fintech company.
“Traxpay is a good addition to our product portfolio,” said Daniel Schmand, Head of Trade Finance and Corporate Credits at Deutsche Bank, in an interview with DerTreasurer. “It makes us a full-range provider in the area of supply chain finance.” He added that the bank had looked at various providers in the market. “What we liked about Traxpay is that from the very beginning they were and are geared towards working with banks – and don’t see banks as competitors.”
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Coronavirus causes a boom in Supply Chain Finance
Traxpay was founded in 2009, but initially focused on B2B payment solutions. About three years ago, the strategy shifted to supplier financing. Since then, the platform has offered two different types of payment: With dynamic discounting, the company uses its own cash to pay companies at an early stage. In reverse factoring, banks act as interim financiers.
In the wake of the Corona crisis, demand for supply chain finance services is growing. Deutsche Bank’s investment should also be seen against this background: “Providing liquidity is currently high on the agenda of many companies – and it will remain so,” according to Schmand. Thanks to the cooperation with Traxpay, such programs could be set up more quickly in the future.
Deutsche Bank wants to position itself more broadly
However, it is not only for companies that the optimization of working capital and the securing of the supply chain will become more important in the wake of the pandemic. From a risk perspective, it is also attractive for banks to provide companies with liquidity via short-term working capital lines. They require a lower capital deposit than long-term credit lines.
In addition, companies that decide to introduce a supply chain finance program are increasingly confronted with proprietary banking solutions and multi-bank fintech offerings. By joining Traxpay, Deutsche Bank also intends to benefit directly from the latter trend. Recently, Hypovereinsbank and the fintech company Taulia also announced a partnership – but without participation.
Supply Chain Finance is highly competitive
Traxpay, in turn, hopes that Deutsche Bank’s investment will provide an important impetus for its growth targets: “We want to become the leading provider of supply chain finance in Europe and thus take a decisive position in international competition,” announced Markus Rupprecht, founder and CEO of Traxpay.
This is an announcement, after all, the market for supplier financing is highly competitive: various fintech companies are positioning themselves as platform providers in this segment. These include Taulia, CRX Markets, Crossinx, Cflox and C2FO. A clear market leader has yet to emerge.
Traxpay has six customers on the platform
In February 2019, Traxpay had won the first well-known customer for its platform, the grocery retailer Edeka. According to the fintech company, six companies on the customer side are currently using the platform and 1,600 suppliers are connected. The volume processed via the platform has reached $1.18 billion (€1 billion) in the past 18 months. “We are cautiously optimistic that we will reach $2.36 billion (€2 billion) by the end of the year thanks to the cooperation with Deutsche Bank,” said Rupprecht. By way of comparison, Deutsche Bank said it maintains 600 supply chain finance programs worldwide with 30,000 connected suppliers.
However, there is a second reason why Traxpay has brought an investor on board with Deutsche Bank: “In discussions with customers, uncertainty repeatedly came to light as to how long we will be able to retain the new players,” said Rupprecht. “We think that we have now greatly minimized this uncertainty with the entry of a financially strong partner.”
Commerzbank pulled out of Traxpay
However, the partnership should not be limited to Deutsche Bank. Traxpay wants to bring more banks on board as investors. “The first talks are already underway,” Rupprecht said. According to Schmand, the Deutsche Bank is “absolutely open for further investors.” The only prerequisite, he said, was that they share the basic idea of an open platform.
In addition to the partnership with Deutsche Bank, Traxpay has sales cooperations with NordLB and LBBW. Meanwhile, the partnership with Commerzbank was terminated last autumn, as Rupprecht confirmed. At that time, there was a management buy-out at the fintech company.. Rupprecht and some colleagues on the Board of Managing Directors increased their shares, and prominent investors such as Commerzbank, Software AG and Earlybird left the company.
Traxpay will use the fresh capital primarily to expand its product range and hire new employees. For example, there are plans to make the dynamic discounting offer accessible to smaller companies and to set up a factoring program. The fintech company also wants to invest in the expansion of sustainability components. Since April, Traxpay has been offering the integration of ESG factors in supply chain financing.
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First published in DerTreasurer, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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