Circular Economy, circling the line

In one of their latest publications, “Remaking the industrial economy“, McKinsey & Company review a regenerative economic model, the circular economy. This concept is starting to help companies create more value while reducing their dependence on scare resources.

The authors explain that “the era of largely ignoring resource costs is over”. “The circular economy aims to eradicate waste (…) systematically throughout the various life cycles and uses of products and their components”, “this approach contrasts sharply with the mind-set embedded in most of today´s industrial operations, where even the terminology –value chain, supply chain, end user- expresses a linear view”, they claim.

Companies like Renault, Ricoh, Michelin, B&Q, H&M, Desso and Veolia are mentioned in the publication as success cases of the implementation of “circular economy” concepts through innovation, joint ventures or collaboration projects with their suppliers. However, “individual corporate actions, while necessary, won´t suffice to create a circular economy at scale”, McKinsey & Company says. The real reward will come when multiple players come together to “circle the line” and re-conceive processes and flows. This will result in superior financial returns, from the overall elimination of waste, and the associated wider economic benefits.

Physical and Financial Supply Chain disconnection

A circular economy is one where waste is designed out, through addressing the nature of products and their supply chain. However, its benefits are not so easy to obtain due to, among other reasons, the disconnection between the Physical Supply Chain (PSC) and the Financial Supply Chain (FSC).

The PSC and the FSC are disconnected in many organizations as a result of how corporates perceive the inherent risks of physical and financial supply chains and how banks present their SCF solutions (a tool for improving cash flow). Distorted information, from one end of a Supply Chain to the other, leads to tremendous inefficiencies: excessive inventory investment, poor customer service, lost revenues, misguided capacity plans, ineffective transportation, missed production schedules, disruption risk and excessive funding needs. Enrico Camerinelli, senior analyst at Aite Group, categorizes the reasons why Physical and Financial Supply Chains are out of sync.

There is still a wide gap to bridge between Physical Supply Chains and Financial Supply Chains but some banks, companies and technology vendors are working hard to close this gap. The launch of LICUOS SCF, based on the LICUOS patent pending core technology, has been an important milestone for solving disconnection. The commercialization in the US of LICUOS SCF started in January 2014 when LICUOS opened its first US office and the technology will be demoed at Bank Innovation 2014 in Seattle on March 4th.

LICUOS SCF objective is to facilitate transactions between trading partners by providing multi-tier financing and payment options that are negotiated to improve each partner´s financial position. The LICUOS SCF solution allows Companies to optimize their working capital with a multi-tier approach. Our solution is much more than a cash flow optimizer and helps companies reach these objectives, among others:

  • Supply Chain disruption risk mitigation. Supplier liquidity safeguards uninterrupted flow of supplies.
  • Business Process Alignment. Looking at the whole physical supply chain and structure the supply chain financing facilities accordingly.
  • Collaboration. Requiring a single connection for buyer and suppliers that can cover the entire accounts payable and receivable gamut.

Financial Circular Economy

Finance almost misses the train of Supply Chain but will definitely lead the circular economy adoption and growth.

In a circular economy, products are designed to enable cycles of disassembly and reuse, thus reducing or eliminating waste. The circular economy is an industrial system that is restorative by design. View the complete World Economic Forum Paper “Towards the Circular Economy: Accelerating the scale-up across global supply chains”:

Image

As noted above, circular supply chains are up and running, they’ve gone global and they suggest that the business opportunities in a circular economy are real and large. Their success provokes a question: Could the “circular economy,” which restores material, energy, labor and, why not, financial inputs— be implemented leveraging existing physical and financial supply chains?

Existing supply chains are the key unit of action, and will jointly drive change. The transition between linear supply chains to circular supply chains needs trust and collaboration between independent companies and belief in the effective management of common resources. Building trust-based relationships and minimizing wastage of resources allow both buyer and suppliers to gain more benefits with fewer resources.

Traditional SCF solutions do not allow an efficient use of financial resources as companies are financing more than they actually need. Disruptive SCF solutions, such as LICUOS SCF, offer two primary benefits to the circular economy approach: economic (more efficient and resilient use of financial resources) and collaborative (deeper connections among buyers and suppliers). LICUOS´ patent pending technology aims to improve companies ‘ability to put financial resources to their most productive use. When cash is tight, liquidity providers funding can be used to meet payment obligations. In healthier times, additional savings can be derived by paying under an early discount program. In both scenarios, LICUOS SCF allows the company to react quickly enough to adjust strategy to current conditions.

Obviously, as Albert Einstein said, “insanity is doing the same thing… expecting different results.” LICUOS SCF, that has already demonstrated its capability in linear and multi-tier supply chains, is a unique solution to leverage the potential of the new circular manufacturing processes and flows of materials and products. The inherent circular nature of LICUOS provides an efficient tool to implement these new concepts in Finance and Supply Chain Finance. As Enrico Camerinelli, senior analyst at Aite Group, said in an interview conducted by Chris Davis at TreasuryToday, “if you look at what LICUOS are offering, that is exactly the sort of direction that I think SCF should be moving in”. LICUOS SCF allows the implementation of multi-tier and circular payment and financing processes allowing companies to take advantages of the synergies and benefits generated by a circular supply chain.

LICUOS wish to thank the World Economic Forum, McKinsey & Company, Finextra, Aite Group and TreasuryToday for their contributions to this post.

For an in-depth look at circular economy industrial system, see the economic and business rationale for making this transition, see the complete World Economic Forum Paper “Towards the Circular Economy: Accelerating the scale-up across global supply chains” and the McKinsey & Company publication “Remaking the industrial economy“.

Advertisements

LICUOS is one of the winners of the 2014 DEMOvation Challenge

LICUOS, the global B2B netting and payment platform, was announced a winner of the 2014 DEMOvation Challenge presented by Bank Innovation. The challenge was judged by five people who named seven companies winners of the challenge, and LICUOS was one of them:

  • Laurence Berkowitz, Advisor (Israel), Bank Innovation
  • Seth Kenvin, Advisor (San Francisco), Bank Innovation
  • Sam Maule, Manager, Carlisle & Gallagher Consulting Group
  • Philip Ryan, Editor, Bank Innovation
  • Dominic Venturo, Chief Innovation Officer for Payments, US Bank

The judges were looking for startups launched within the last 24 months that possess unique intellectual property or business models, or are differentiated from other FinTech startups.

Bank Innovation 2014

Thanks to the award received, LICUOS will participate at Bank Innovation 2014 (Seattle, March 3-4), the annual event for executives and innovators to collaborate and share ideas to improve customer acquisition and retention through new products and strategies.

Image

The DEMOvation Challenge is part of an overarching effort to make the Third Annual Bank Innovation event even more valuable than in previous years. LICUOS will present its technology to Banks, Credit Unions, Venture Capital Firms, Investment Banks, Start Ups and Technology Companies through a demo slot.

LICUOS also took part in 2013 in the FinovateSpring in San Francisco, Innotribe Startup Challenge in New York, the Thinking Digital Startup Competition in Newcastle, Next Bank – Innotribe Startup Disrupt contest in Madrid and SIBOS in Dubai introducing its innovative and technology for cash and working capital management.

Our technology

LICUOS´ core patent pending technology enables companies, regardless of their size or industry, to compensate, pay and finance their commercial debts, allowing them to reduce their funding needs and their client´s credit risk exposure. Our algorithms search and provide the optimized netting, payment and funding proposals for companies in an efficient, automated and cost-effective way.  Thus, businesses optimize their working capital and cash management activities and reduce their dependence on the banking system.

LICUOS will introduce the LICUOS Netting Hub and LICUOS SCF solutions. These solutions meet the needs of US Financial Institutions, Business Systems and B2B Payment Platforms:

  • The Netting Hub, implemented as an API to the LICUOS Platform, allows our partners (Business Systems and B2B Payment Platforms) an easy integration, and a fast delivery of multilateral netting based services through their platform.
  • The LICUOS SCF solution allows our Partner Banks to offer an innovative Supply Chain Finance solution to their customers (Businesses) that optimizes their working capital with a multi-tier approach, including suppliers at the Tier 2, Tier 3 level and beyond.

Thank you

We’d like to thank Bank Innovation, the judges and the Bank Innovation 2014 Partners for making the event possible.

For further information about Bank Innovation 2014, please visit: http://bankinnovation.info/.

LICUOS opens NYC office

LICUOS opened its first New York office.

The Spain-based B2B payment and netting platform leased space in DUMBO, Brooklyn, located at 45 Main Street. Formerly a manufacturing area, DUMBO has become an established hub for New York City technology and digital media startup businesses.

The New York office will focus on meeting the needs of US Financing Organizations (Banks, P2P Lending platforms, etc.), Business tools (Enterprise Resource Planning (ERP), Accounting, E-invoicing systems, etc.) and B2B Payment Platforms (Payment solutions for B2B E-Commerce, Marketplaces, Corporate Networks, etc.), introducing our Netting Hub and LICUOS SCF solutions.

LICUOS also has offices in Madrid and Elgoibar, both in Spain.

Image

Building the future of financial services through collaboration and innovation

We like this editorial on IDEON Financial Solutions companies, including LICUOS, by Inigo San Martin, Director, IDEON Financial Solutions: http://internationalbanker.com/building-the-future-of-financial-services-through-collaboration-and-innovation/

Image

A few years ago, we realized the majority of consumers in Spain were exposed to a risk they knew very little about and had no way of eliminating it. Interest rates on most loans, whether home mortgages or business lending facilities, are directly linked to Euribor. In other words, when Euribor goes up, consumers pay more for their loans and vice versa. Corporations have been managing this risk for many years, through the use of derivatives contracts entered into their banking counter-parties. However, these transactions were not accessible to consumers or small businesses. IDEON’s first solution, Rateguard, was developed to specifically address this problem. Rateguard allows banks to offer interest rate risk mitigation products to their retail and business customers in an economic way by covering the whole life cycle of these products from design to document management. This front to back and fully automated solution to create, distribute and manage financial risk hedging products, including the complete document cycle was installed in more than ten top tier financial institutions in Europe.

A truly customer centric deposit solution

Following the same idea of democratizing existing banking products to all segments CHOICE Savings & Investments was developed. This software allows banks to offer in an efficient manner the ability to deposit solutions where the customer can personalize the complete economics of their account in real time at the point of sale. Traditionally, personalization of this type has only been available to high net worth segments due to the many manual processes and restrictive costs that offering customization entails. Through the use of CHOICE software, personalization is possible for any segment in any type of deposit product, traditional or market linked.

Allowing customers to partake in the design of their savings accounts, greatly enhances their overall banking experiencing. For banks, in turn, offering personalization reduces the pressure to always offer the highest rate therefore positively impacting bank margins, avoiding rate shoppers and attracting long term relationships.

Making supply chain financial management more efficient

Another solution developed by IDEON team for financial institutions is LICUOS SCF, based on the LICUOS technology, which allows banks to offer a Supply Chain Finance solution with a multi-tier approach, including suppliers at the Tier 2, Tier 3 level and beyond. LICUOS SCF allows its partner banks to generate new business and commercial opportunities with existing and new customers whilst optimizing internal rating models for credit risk admission and monitoring. The economic sectors that are currently showing a greater interest in the LICUOS SCF solution are Automotive, Retail (both food and textile), Pharmaceutical, Energy, Tourism and Transportation.

LICUOS itself, a joint venture between IDEON and AVS, is an online B2B payment platform where businesses can compensate and pay their commercial debts. LICUOS´ patent-pending technology identifies and generates the most convenient and efficient A/R and A/P netting and payment proposals for businesses. As Lisa Pollack explained on the Financial Times Alphaville Operation sovereign debt net, multilateral netting would allow sovereign debt cancellation among countries: “The EU countries in the study can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58% […] France can virtually eliminate its debt – reducing it to just 0.06% of GDP.”

B2C versus B2B models

But not only does IDEON develop solutions for financial institutions. Various business lines have been developed to benefit consumers directly. Through its offices in Madrid, Spain and New York City, IDEON’s ultimate objective is to improve people’s and businesses financial life and this can be achieved through both B2C and B2B models.

One example of a B2C business created by Ideon’s team is Fintonic, an online/mobile personal financial management tool that already has 100,000 users in its first year of existence. Users are able to see in a single page all their financial positions (loans, credit cards, checking accounts…) regardless of the financial institutions where these are held. Additionally, users can set up budgets and alerts to make sure that they stay on track of their spending objectives.

Tradeslide, another B2C business by IDEON, caters to a very specific population – foreign exchange traders. This tool increases the overall transparency in the FX market by categorizing traders according to a set of proprietary algorithms.

One of the main problems in the post crisis era is the lack of financing from banks for small and medium size businesses (SMB). Many have been suffering from this situation for more than three years now. SUMMA Investment Solutions, another idea generated by the IDEON team, is a non-bank financing facility for SMB´s who have outstanding invoices. SUMMA has established a fund whose investment strategy consists of acquiring directly from SMB short-term commercial invoices.

Partnering for innovation

Innovation and collaboration are two of the pillars of IDEON´s core strategy. IDEON seeks to conduct innovative ideas through collaborative projects with financial institutions, businesses and financial technology entrepreneurs. These projects are implemented through both IDEON itself and its affiliated companies, examples of which we have seen in this article.