Application advantages of blockchain in supply chain finance and four common modes

Since General Secretary Xi emphasized on accelerating the development of blockchain technology and industrial innovation on October 24, 2019, the application and promotion of blockchain has become a hot topic. Among them, the application in the field of supply chain finance is particularly prominent. With blockchain technology, can supply chain finance be completely solved? The following will focus on analyzing what blockchain technology can do for supply chain finance.

On March 31, 2020, Premier Li Keqiang presided over an executive meeting of the State Council to deploy and strengthen financial support for small, medium and micro enterprises. This is the eighth time that the executive meeting of the State Council in the past two months has targeted small, medium and micro enterprises and individual industrial and commercial households. The group “supplying oxygen”, the meeting decided at the same time to broaden the channels for low-cost financing for private, small and medium-sized enterprises, and encourage the development of supply chain financial products such as orders, warehouse receipts, and accounts receivable financing.

Supply chain financial products have always had major pain points, such as many participating links, long chains, high correlation, difficult to identify transaction scenarios, etc. How to solve the identification of authenticity risks by financial institutions is the core problem of solving supply chain finance Where.

As a new type of technology combination, blockchain integrates P2P networks, consensus algorithms, asymmetric encryption, smart contracts and other new technologies. Transparent and credible rules, build a traceable block chain data structure, with the typical characteristics of distributed peer, chain data block, anti-counterfeiting and tamper resistance, traceability, transparency, credibility and high reliability, and its technical characteristics It has unique advantages in the supply chain financial scene.

Introduction to Supply Chain Finance

Regarding the definition of supply chain finance, it is generally accepted in China that it refers to the use of self-compensated trade financing methods based on core customers, based on real trade background, and closed cash flow through professional means such as account receivable pledge registration and third-party supervision. Or control logistics, comprehensive financial products and services for upstream and downstream enterprises in the supply chain.

Based on the above definition, financial institutions have the following three important considerations when developing supply chain financial services:

Industry: In consideration of policy risks, industry risks, etc., the subdivision business direction of financial institutions must generally follow the requirements of the “Industrial Structure Adjustment Catalog” issued by the National Development and Reform Commission, and actively intervene in encouraged businesses that comply with the national policy orientation. Restricted and eliminated industries are in a state of cautious intervention; on the other hand, they are industries that are highly volatile with the economic cycle, or industries that have experienced major risk events, such as insurance company credit guarantee insurance products, steel trading Industries, etc., financial institutions are also in a more prudent state of operation.

In terms of core enterprises: credit risk and authenticity risk are the focus of financing business. Credit risk is the repayment risk of core enterprises. Core enterprises are generally the ultimate payer, guarantor or witness in the financial link of the supply chain. The requirements for the qualification of core enterprises are stricter. According to the strength and rating of core companies, commercial banks will have different credit rules. Generally speaking, large state-owned core enterprises that can expand upstream and downstream supply chain financial services on a large scale need to meet the rating qualification requirements above AA. For private core enterprises, the above rating requirements will be relatively higher; for restricted or eliminated categories In most industries, commercial banks generally choose leading companies in the industry to operate. For non-bank financial institutions, the decision-making mechanism will be relatively flexible. Due to the higher cost of funds, the above-mentioned rating requirements can be moderately reduced.

The focus of authenticity risk consideration is to truly and effectively transfer the credit of the core company to other upstream and downstream companies. During the risk review, the core company’s right confirmation link will be considered. Generally, there are two situations. One is the core company. The right is confirmed directly by issuing paper documents with a red seal. In actual operation, there will be a situation where the core enterprises have a low degree of cooperation. Business requirements for risk control or efficiency; another situation is that financial institutions are directly connected to the core enterprise’s erp system, and the core enterprise’s confirmation information is directly transmitted to the financial institution. However, this approach has certain problems. On the one hand, If based on the core enterprise’s erp system, the core enterprise develops ports for financial institutions. From the perspective of financial institutions, there will be a certain moral hazard, and the authenticity of the confirmation information cannot be effectively confirmed; once there is a repayment risk, the system will be connected It is also unable to leave enough evidence documents to support the post-loan process. On the other hand, financial institutions have relatively low willingness to go deep into the industry, and are generally unwilling to develop specialized systems for data connection. In this case, it is often solved by building a consortium chain through the blockchain.

Supply chain: Usually the supply chain needs to have certain scale and stability requirements. Financial institutions need to invest a certain amount of technology development costs and personnel to carry out supply chain financial services. If the scale of the supply chain is too small, it is difficult to produce certain financial products. Scale effect, the capital gains brought by financial products cannot cover the cost of product development investment, which will lead to a situation where the income will not make ends meet; if the stability of the supply chain is insufficient, the risk control structure will also be difficult to achieve high-quality breakthroughs. The service targets of supply chain finance are mainly aimed at some weakly liquid assets, such as accounts receivable, inventory, advance payment and other accounts caused by the delay in settlement of funds, and need to meet the characteristics of self-compensated trade financing requirements. At the same time, in accordance with the requirements of the “KYC principle” proposed by the financial institution supervision department, financial institutions need to straighten out the connection with financing customers, achieve true and effective identification and risk identification, and rely on some tripartite data information and central bank credit information. A preliminary assessment of customer access is made. In the context of supply chain finance, financing customers need to meet the requirements for the length of cooperation with the core company, such as the cooperation time not less than 1 year.

The authenticity risk of the transaction link and the collateral is the focus of consideration at this stage. The main concern of financial institutions is that the flow of goods and capital are concentrated on the platform of the core enterprise for management, and the core enterprise may have problems due to the consideration of the platform’s own interests. Certain forgery motives are prone to moral hazard. In order to make full use of the credit-enhancing role of goods, in practice, third-party supervision methods are often used, that is, financial institutions will designate third parties with certain guarantee capabilities to supervise goods, but In consideration of its own interests and risks, third-party companies will put forward some related requirements. For example, the third-party goods are stored in designated warehouses. This situation directly causes additional logistics cost increases, or the need for information transformation of the warehouse. Charge additional renovation costs, thereby greatly increasing the actual operating costs. In actual promotion, the promotion model of third-party supervision has greater limitations and has not been carried out on a large scale. The advantages of blockchain, such as decentralization and non-tampering, can transparently display information such as contract flow, goods flow, and capital flow in the supply chain, so as to solve financial institutions’ concerns about moral hazard.

Advantages of blockchain

As a new type of technology, blockchain has the technical characteristics of decentralization, distribution, and non-tamperability. In a stable supply chain financial scene, it can perform the following functions:

Transparency of the entire supply chain process

Information around key links such as information flow, logistics, and capital flow can be visually displayed in a timely and error-free manner with the help of blockchain technology, and through transaction verification with paper documents and Internet of Things information, the supply chain data can be highlighted. Authenticity.

Improvement of financing business efficiency

The introduction of blockchain technology can break the waterfall-type traditional operation process. Certain materials required for risk control review can be displayed in the first time through smart contracts, thereby improving the efficiency of the entire review process.

Increase the credit scale of core enterprises

While transferring the credit of core enterprises, it will also reflect the credit enhancement function of small and medium-sized enterprises and goods, and gradually transfer and decentralize the quota of core enterprises in financial institutions to small and medium-sized enterprises. This will further release the credit lines of financial institutions to core enterprises.

Increased refinancing capabilities

For small and scattered assets with a large number of assets, the performance of the underlying assets is particularly critical. A completely transparent and credible display helps investors focus on the structure of the underlying assets rather than just the qualifications of the debt subject On.

On the basis of the above points, blockchain can assist core companies to strengthen the control of the upstream and downstream of the supply chain, use financing income as an additional source of profit, and establish customer trust and other functions.

For small, medium and micro enterprises, the benefits that blockchain technology can bring are as follows:

Play the effect of digital credit appreciation

Industry experience is often one of the key elements for small, medium and micro enterprises to obtain orders and financing support from upstream and downstream enterprises. The traditional situation of obtaining orders through relationships in the past is gradually being broken. The refined management of enterprise cost elements also requires experienced small, medium and micro enterprises. Coming to serve it, small, medium and micro enterprises that have survived several rounds of economic cycles can also be more favored by funders. The key is the proof of historical experience. Blockchain can rely on the chronological order to carry out the behavior of the target company. The deposit record forms a credible deposit certificate of a third party, thereby assisting the enterprise to realize the value-added digital credit.

Realize credit enhancement relying on core enterprises

Blockchain helps core enterprises to exert their own credit transmission capabilities, so as to benefit upstream and downstream small, medium and micro enterprises. In financing scenarios, it can make up for the disadvantages of small, medium and micro enterprises due to their insufficient qualifications.

Promote the growth of its own overall financing level

The three key points of financing improvement, the increase of credit scale, the acceleration of capital turnover efficiency, and the reduction of financing costs, need to be gradually cultivated by enterprises. Blockchain helps to establish their own financing structure on the basis of compliance. So as to help the growth of the company’s overall financing level.

To play the advantages of blockchain technology, the following conditions must be met:

Related projects have met the access requirements of financial institutions

The access requirements here are divided into two dimensions:

The core enterprises have met the access conditions of financial institutions and have obtained a certain amount of credit from financial institutions. The basic financing cooperation model of the two parties has successfully implemented pilot operations. It’s worth emphasizing here that if a core company cannot co-operate with financial institutions, such as industry attributes, credit records or litigation that do not meet the requirements of financial institutions, then how to introduce blockchain technology is futile. Yes, blockchain cannot solve the problem of policy access for core companies or industries.

The expected business scale is relatively large. Specifically, the development of corresponding financial products by financial institutions often requires a certain amount of manpower and system construction investment. If the expected scale is small, the financial income generated is small, and the financial institution will be unable to make ends meet. Under the circumstances, their willingness is relatively low.

Requirements of the core enterprise ERP system

Specifically, the core enterprise should have a sound ERP system, with clear online operation functions from customer registration, application, purchase, transportation, warehousing, delivery, etc., and strong information on logistics and capital flow in the supply chain. The process tracking reflects that the blockchain system is combined with the above-mentioned system to display all links of the supply chain transparently and visually.

Smart contracts facilitate cross-checking of authenticity

In order to further enhance the authenticity of the data on the chain, on the one hand, information flow, logistics, and capital flow information can be fully reflected in time sequence. On the other hand, some paper documents involved in the supply chain process, such as invoice documents, Contract documents, customs declaration documents, and transaction documents with other core companies can enhance the authenticity of the data, and at the same time collect information with the help of relevant Internet of Things equipment (such as GPS for transportation vehicles, RFID/NFC data of goods in and out of the warehouse, weighing information) To provide corresponding data support. With the help of smart contracts, the automatic transaction verification of data is realized, and the operation cost of transaction forgery is increased.

Participation of at least two powerful companies

Traditional supply chain finance mainly targets the N+1+1 core business model, that is, N’s upstream supplier, 1 core company, and 1 factoring company under the name of the core company. Due to the core company’s association with the factoring company under its name In the relationship, the two parties have established an absolute trust mechanism, and the advantageous functions of the blockchain are difficult to play. It can only be done when both the core enterprise and the financial institution are involved.

Introduction to the existing blockchain + supply chain financial model

This is a relatively mature application of blockchain in the supply chain financial scene. By forming a set of non-tamperable blockchain digital vouchers from the accounts payable of core enterprises and subordinate units, the internal units of the core enterprises shall follow certain The issuance of the rules has the characteristics of confirmed rights, holdings, detachable, circulated, financing, and traceable.

Application advantages of blockchain in supply chain finance and four common modes

The above scheme is divided into the following stages:

(1) System docking: Financial institutions and commercial banks sign a general-to-management overall cooperation agreement, and key data such as business flow, contract flow, logistics, and capital flow of the core enterprise ERP system are directly uploaded to the chain for certification in chronological order. Financial institutions grant a certain amount of credit based on the asset strength of the core enterprise.

(2) Supplier recommendation: The core enterprise directly recommends primary suppliers that may have accounts receivable financing needs to financial institutions, and the financial institutions will conduct compliance review of the suppliers one by one; the financial institutions will pass the review For Tier 1 suppliers, you can recommend its upstream Tier 2 suppliers to financial institutions, and the financial institutions will conduct compliance audits on Tier 2 suppliers one by one. Similarly, for level 2 approved by financial institutions, level 3 suppliers can also be recommended, and so on.

Financial institutions generally require suppliers to open special supervision accounts in designated banks for the collection of accounts payable by core enterprises.

(3) Financing application: Under the premise of confirmation by the core enterprise, the first-tier suppliers that have formed accounts receivable can apply to financial institutions for financing, or split the confirmed accounts receivable to the second-tier suppliers , The second-tier suppliers apply to financial institutions.

(4) Review of loans: After the financial institution has verified the right of the core enterprise, it will collect invoice copies, statements and other related materials from the supplier, and at the same time, confirm that the core enterprise’s payment account is a special supervision account that has been opened. After signing the contract, you can start lending;

(5) Deduction at maturity: When the maturity is reached, the core enterprise directly repays the money to the financial institution.

Without the use of blockchain, traditional enterprises can also operate through pure offline methods, reverse factoring, or the “X letter” model of China Enterprise Cloud Payment.

(1) The operation is purely offline, and the core company’s each confirmation of rights is realized by the company’s official seal. A single transaction is generally small in amount and requires a huge number of operations, and each time the core company is stamped The operation process required for internal approval is cumbersome, and it is often difficult to guarantee the requirements of supplier financing efficiency. At the same time, the purely offline operation method may easily lead to some deficiencies in the link of credit information collection. For financial hooks with strict loan review links, there will often be supplementary information, and the financing experience is relatively poor. And it is easily affected by the willingness of core enterprises to confirm their rights;

(2) Reverse factoring model: The core enterprise’s ERP is directly connected with financial institutions, and it is synchronized once a day, and synchronized to the products in the core data pool. The difficulty lies in the business factoring model, which only stays at the first-tier supplier, and cannot communicate with 2 -N-level supplier extension, and it is not easy to connect with the core enterprise’s ERP system.

(3) The “X-Trust Model” transforms the core enterprise’s right confirmation behavior from pure offline to online. Compared with pure offline business, the efficiency is improved, and it can also free the core enterprise from the need to issue a large number of offline documents. The act of document transfers credit to multi-level suppliers, which can be circulated, divided, and discounted. But the core difficulty lies in the difficulty of confirming the authenticity of multi-level trade, the “double spending” issue or the validity of electronic voucher litigation. At the same time, the X-trust model also has higher requirements for the scale of a single core enterprise. The X-trust model based on a single core enterprise is difficult to achieve a breakthrough from the “N+1+N” to the “N+N+N” model.

Based on multiple and decentralized small, medium and micro refinancing models

The level of refinancing capacity is usually a key factor for core companies to give full play to their financing advantages. In order to enrich the diversified refinancing solutions of core enterprises and increase the leverage ratio, it is necessary to establish a clear and credible project structure for the existing financing business to facilitate the review and review of the refinancing institution, thereby increasing the refinancing institution’s grant to the core The financing strength of the enterprise. Refinancing business is generally divided into commercial bank refactoring, asset securitization, asset package transfer, etc. For example, taking the development of asset securitization ABS business as an example, the market interest rate of bonds is often based on the qualifications of the debt subject and the basic assets of the underlying assets. The performance is considered in a comprehensive manner. For small and scattered, but large numbers of assets, the performance of the underlying assets is particularly critical. A completely transparent and credible display is conducive to investors to focus on the structure of the underlying assets instead of just debt. The subject’s qualifications. In this regard, the functions that the blockchain can play are summarized as follows:

Enhance attractiveness to investors

Trusted asset data based on blockchain technology helps to make assets open and transparent, strengthen visibility, and enhance the attractiveness of asset information in the asset pool to investors;

Intelligent monitoring of asset performance

The smart contract mechanism is conducive to automatically generating asset performance information, analyzing the performance of assets, promoting the secondary market valuation of securitized assets, enhancing the attractiveness of assets to traders, and also helping investors to take risks Early warning identification and early adoption of relevant measures when unfavorable factors occur in asset conditions.

Weakening the qualification requirements for core business entities

Self-certification of assets is helpful to build a whole-process standardization and compliance system, promote a virtuous cycle of assets, and help investors focus on the performance of the assets themselves, thereby weakening investors’ debt The relevant requirements of the subject.

The specific staged scenario is described:

Application advantages of blockchain in supply chain finance and four common modes

Asset formation link

Specifically, it refers to the entire process of the formation of the assets of the client’s application, risk control review, signing of financing contracts with the client, margin payment, and confirmation of accounts receivable. Through the process node and the audit document node on the chain, the completion of the asset formation link and the authenticity of the transaction are ensured, and a true and credible scenario of asset creation is established, which can be verified by refinancing institutions and related auditors in the later stage.

Through the block chain browser, the data of the related on-chain nodes can be visualized and credible, and the auditor can confirm the authenticity of the data file information by comparing the HASH value during verification.

The following figure shows the visualized information after the chain:

Application advantages of blockchain in supply chain finance and four common modes

Asset package screening

Assets that meet the requirements of concentration, credit review, etc. will be packaged into the SPV. For this link, it is planned to pass the screening process on-chain to increase the transparency and visibility of the screening process, and make each other Can recognize the screening process of the inspection.

Asset audit link

The asset packaging process needs to be strictly audited by relevant audit institutions. For example, law firms need to issue legal professional opinions on asset packages, rating agencies need to provide ratings on asset packages based on asset conditions and debt subject information, accounting firms It is necessary to provide financial professional opinions, etc., relying on credible blockchain assets, and sharing asset data and debt subject data to a certain extent, which will help promote the audit process of related parties.

Asset issuance and sales

Based on the securitized asset information of the trusted link of the blockchain, the relevant data and information of the asset are open and transparent, which will help increase the attractiveness of investors in the sales link and increase the level of investors’ subscription rate.

Secondary circulation of assets

Real-time tracking and display of asset performance based on blockchain smart contract technology can reflect the performance of underlying assets in a timely manner, as well as the operating information, repayment status, and business information of underlying customers, which is helpful for changes in asset conditions To adjust the changes in asset prices, and accurately reflect asset performance in asset prices. At the same time, it is also convenient for supervision to conduct penetrating management of ABS underlying assets, reducing business complexity and error probability due to manual intervention, and significantly improving the efficiency of cash flow management.

In addition, in addition to the ABS asset securitization financing model, the steel-yin e-commerce company can also develop refinancing business through trust and other methods to increase the scale of self-operated business, but the disadvantage is that it is restricted by the asset-liability structure, and the financing scale is difficult to fully expand , The use of leverage is subject to certain restrictions.

Procurement financing model based on the digitization of physical assets

This model is mainly used in the bulk commodity industry, taking the pledge of physical rights of bulk commodities as an important risk control method, such as the mode of proxy procurement of steel. Specifically, the financing demander entrusts the pallet to purchase goods from the designated steel plant and pays a certain deposit in advance. The pallet party provides financial services to the client, and purchases goods from the steel plant according to the client’s requirements. After the goods are stored in the warehouse, the client redeems the goods within the contract period (usually three months), and charges the service fee according to the time the capital is used to solve the trader The problem of shortage of funds. In the core enterprise or the e-commerce platform under the core enterprise, the e-commerce platform often assumes the function of the fund pallet party.

The fund management of the pallet party is mainly under the control of the cargo rights, that is, the release of the cargo rights is based on the repayment of the entrusting party. If the entrusting party does not repay the payment regularly, the pallet can dispose of the goods in time. Based on this scenario, the management of goods has become the core risk control point.

We have proposed a digital warehouse receipt scheme based on blockchain. The plan is to design the steel physical assets in the warehouse as a digital asset based on the blockchain, and use blockchain technology to upload the status data of the warehouse receipt in real time to form a “digital asset” that maps to the transfer of physical warehouse assets.

(1) The entire process data from the storage of goods in storage, storage adjustment, locking, pledge, release, out of storage, return and storage, etc., will be put on the chain as soon as possible to prevent data information fraud and make the warehouse receipt data flow itself can be formed A complete closed loop, the data may self-certify innocence, provide an effective data certification infrastructure for the transaction party, and also prove the authenticity of the data to some external service parties;

(2) After the digitization of warehousing cargo assets, multiple parties (such as steel mills and financial institutions) can jointly control the state of warehouse receipt assets through cryptographic technology (such as threshold signature technology), so as to achieve more flexible control of movable assets, thereby Derive more innovative model services.

Application advantages of blockchain in supply chain finance and four common modes

Problems that the solution can solve:

Multiple pledges: With warehouse receipts as the core subject matter, the entire operation from procurement to sales can be controlled and traces can be left;

Warehousing asset authenticity: Set up remote controllable node permissions for creditors, and cooperate with regular inventory checks to realize warehouse receipt control and remote visualization.

In actual operation, in order to solve the problem of the authenticity of the data on the chain, the blockchain and the Internet of Things are often used to connect the two. The data collected in the first time on the Internet can be stored on the chain to ensure the authenticity of the first-hand data.

Order financing model based on historical data / procurement bidding

For suppliers who use credit sales to sell goods, the order financing model can often solve the difficulty of suppliers’ capital withdrawal. The key point of the risk control model is to determine whether the supplier generates orders based on winning bids or transactions based on historical data.

Based on the core enterprise procurement/government procurement business, the authenticity of the project is often solved by depositing the bid winning notice through the blockchain, such as the blockchain small, medium and micro enterprise financing platform led by the local government public resource trading center. By putting the core data of the bid documents on the chain that cannot be tampered with, it reflects important matters such as the amount of the bid, the delivery period, etc., so as to provide scenario support for the credit financing of financial institutions to the bid winner.

In another case, the past sales data of the supplier’s history can not be tampered with on the chain, and through trend analysis and other means, the scale of supply that may occur during this period can be judged, and this can be used as a basis for credit support Etc.

In summary, the blockchain can play a certain role in solving the financial authenticity risk of the supply chain, but its role needs to meet many prerequisites, and the specific application needs to be considered in conjunction with the financial product scenario. , We prefer to understand the blockchain as a plug-in in the financial risk control link of the supply chain, which can make outstanding contributions to data verification and exchange, but it also has certain drawbacks, such as triggering the authenticity of the data on the chain, The deployment of nodes and the enthusiasm of multiple parties often need to be considered together.



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