On November 21st , Alvantia held its now traditional Working Breakfast at the Hotel Intercontinental with the Spanish Factoring Association (AEF). It is an informative event which aims to contribute to the development of the Factoring and Confirming industry.
Representatives from almost all of the financial entities that make up the AEF together with other companies from the trade financing sector, met for the fourth edition of this event, which mainly focused on the Confirming product. The event was presented and chaired by Alvantia’s CEO, Roberto Gutiérrez.
The president of the AEF, Carlos García Casas, began his talk by reviewing the sector’s current position, which has maintained its upward trend: the total of the assignment of receivables was 131.126 billion euros at the end of September, which is a growth of 11% in comparison to the previous year. The AEF estimates that the total of assignments by the end of the year will stand at 186 billion euros, a 12% increase compared to the data from 2018. These figures demonstrate the importance of this activity on the Spanish economy, and indeed, the total receivables managed (Factoring assignments, Confirming assignments and non-advanced Confirming orders) accounted for 19.4% of Spanish GDP in 2018 and it is expected to be above 20% in 2019.
The association’s president took advantage of the forum to also comment upon the latest news on Confirming and mention mistakes that had been made regarding risk and accounting aspects. In his presentation he confirmed that, on the one hand, the nature of Confirming helps liquidity and circulation of financial movements within the system and, on the other, he insisted that, in any case, “the product should not be branded as toxic or a catalyst of poor cash flow situations, what should be done is check to see how is used and recorded in corporate accounting in those large companies that use the product. These companies are the ones who should ensure appropriate accounting and, perhaps, include that information in their annual reports.”
The AEF’s chairman ended his speech by addressing the future outlook of Confirming, a product he believes will continue to be invested in thanks to the simplification of the value proposition and the digitisation of processes. “My forecast is that growth will come from the ‘complete extension’ of the product, both from the point of view of the payer and the supplier,” he said.
In her speech, Mónica Martín Blanco, a consultant from Supply Chain Finance and AEF representative on the European Factoring Federation’s Legal Committee, focused on European and international regulatory developments regarding anti-money laundering and countering terrorist financing. She stressed that the increased role of the European Banking Authority (EBA) following implementation of the Fifth Anti-Money Laundering Directive will standardise regulations in member countries and the requirements needed for more comprehensive Know Your Customer (KYC) processes.
In her opinion, to combat this issue, apart from educating on the need for KYC on the Confirming payer and not just the supplier, improved supplier segmentation would ensure compliance with KYC regulations, a lower transaction cost, risk control, higher profitability and an improved perception of the product by both suppliers and customer.
The last speech was given by José Miguel Guillén, Head of IT at Finalbion. This Spanish fintech, focused on financing working capital, has managed a volume of 1.238 billion euros since it was founded in 2015 and has recently implemented Alvantia’s trade financing platform.
Guillén stated that, prior to implementing Alvantia’s platform, they had been working with software that had numerous security and operational failings. It was closed software not liable to many enhancements of updates and lacked customisation possibilities: “Despite being a functional platform, its idiosyncrasy alone prevented control over the business because not even the processes were known,” said Guillén.
He then explained the substantial improvements for both business and day-to-day management as a result of the change of platform. In this regard, he stressed that Alvantia’s platform is fully integrated with the company’s other systems and processes and their team functions as an extension of Finalbion’s. Another major differentiating value is the user experience that he rates as excellent. “It is a platform with defined processes that can be adapted to any business need. And as it is very intuitive, the learning curve is very fast. It is a scalable and transportable solution with the flexibility to adapt to the peculiarities of the jurisdictions of the countries in which we currently operate and of those in which we wish to operate in the future,” he said.
An open discussion was held at the end of the meeting in which professionals from the sector agreed that Confirming as it is known nowadays still has great potential in the coming years. However, it was recognised that new business models and operators are making an appearance in the Spanish market, and the corresponding space and importance will have to be given to them in due course.
The event was brought to a close by Roberto Gutiérrez presenting Carlos García Casas with a commemorative plaque in recognition of his successful professional career and in thanks for his contribution to the innovation and dissemination of Factoring and Confirming products.