UOB taps fintech firm to make supply chain payments easier

Virtual credit card account extends cash flow for businesses, allows suppliers to get paid immediately

Singapore

WITH Singapore having the most suppliers selling on credit in the Asia-Pacific, United Overseas Bank (UOB) is aiming to ease cashflow pressures across businesses' supply chain.

The bank on Tuesday launched a "virtual payment" service here that allows businesses to pay their vendors and suppliers through a virtual corporate credit card account. The service is a first for South-east Asia, said UOB.

This works even if the vendors and suppliers do not accept card payments, with the transactions processed in part by a fintech company, Invapay, that has partnered UOB.

This means suppliers can receive payment immediately, while the company making payments can extend their cash flow for up to 90 days, from the typical 30 days.

The service will also automate the account reconciliation process for companies, which could cut out some forms of manual processing.

There is a processing fee, which ranges from 1.5 per cent to 2 per cent of the total transaction amount.

Eric Tham, head of group commercial banking at UOB, said that businesses are looking for ways to use technology to increase their profits, especially as they grapple with rising business costs and a tight labour market.

"In the current economic climate, it is important for companies to be even more proactive in managing their cash flow and increasing productivity to ensure their continued growth," he said in a media release.

This latest service comes as nearly 55 per cent of the total value of business-to-business sales of the suppliers in Singapore were made on credit in 2016, a survey by Atradius Collections, a trade credit insurance and debt collection firm, showed.

This is higher than both its 2015 figure of 49 per cent, and the regional average of 46 per cent.

More suppliers surveyed in Singapore than in the Asia-Pacific reported late payment of invoices, with the average number of days of sales outstanding (DSO) at 46 days, again higher than both in 2015, and when compared to the regional average of 41 days.

"Singapore's DSO increased over the past year reflecting less efficient collection of overdue invoices," the survey noted, but added that the proportion of such unpaid receivables averaged 44 per cent - in line with the Asia-Pacific average.

A trial with NEC Asia Pacific showed that its payments processing has improved from up to 60 days to fewer than seven days from the time that the invoices are received.

The service has also minimised human error, because of the automated processing, said Sandra Kwok, finance director of NEC Asia Pacific, in the release.