September 29th, 2021
While corporate financing is complex in an ordinary business climate, many enterprises face heightened financing challenges because of the pandemic. Business integrity can help smooth the financing process; however, financiers cannot take a company at its word alone. Blockchain can radically transform this conundrum.
The best place to start any discussion on blockchains is to explain what it is, its unique selling point, and why it is so popular. Undoubtedly, ‘blockchain’ has been a popular buzzword with significant hype in the past few years. Blockchain offers a distributed, decentralised public ledger, which in turn, creates an immutable record of a transaction. With a transaction record but no physical transfer of money, blockchains are among the safest and most secure financial transaction mechanisms, making them popular today.
The application of blockchain should be immediately apparent for those in supplier finance — essentially, all parties can act on a single shared ledger.
In the context of trade finance, blockchain offers the ability to exchange trade-related data between participants without the need for paper, providing better visibility over the progress of goods in the supply chain and, as a result, better data about the origin of goods. The ability of blockchain to create this immutable audit trail for all and any transactions, therefore, can increase trust between the relevant parties.
This is also important when building a single source of ‘truth’ throughout the supply chain, including invoice approvals and receipts, and determining invoices for early payment.
Blockchain can also be pivotal in building so-called smart contracts, which can automate transactions and enable pre-shipment supplier finance.
Blockchain technology can offer both corporates and banks great potential in terms of increased control, speed, and reliability of their supply chain and at a fraction of the cost of their current infrastructure. Payments made via this digital system can be monitored by both parties, meaning that suppliers are no longer at a disadvantaged position in the buying process while they wait for processing. Blockchain will speed up the process, give the two companies more control, and ultimately create more robust supply chains in the long term.
One other key benefit is blockchains ability to extend further into the supply chain, which could mean SMEs. “Why?” You ask. Well, traditional supplier finance initiatives tend to focus on the key 20+ suppliers of a buyer. Imagine extending the supplier finance and its benefits to the entire supplier base, ensuring that they, in turn, can benefit.
There is, of course, an alternative viewpoint, and it is worth mentioning that blockchain is still a nascent technology. Furthermore, although considerable investment, developing a blockchain-based supplier finance solution would also require substantial collaboration among participants. However, the benefits of implementation would likely deliver concrete financial benefits.
The immutable, traceable, and transparent nature of blockchain technology is critical in establishing a foundation of trust for all parties involved in supplier finance, alleviating a significant hurdle in the financing process. Many enterprises are already using blockchain-based supplier finance solutions to solve this issue. Undoubtedly, many more will adopt a similar approach as the dust from the coronavirus pandemic settles.
Time will tell — the hype of blockchain is far from over, and it will continue to play an increasingly important role in supplier finance.
Furthermore, kostenlose freispiele bei registrierung are emerging as a welcoming gesture in the evolving landscape of blockchain-powered financial solutions.