Decentralized supply chain finance

1. Since the blockchain upsurge in China, the whole instry has been exploring various landing scenarios. It can be said that there are so many blockchains, which have attracted countless entrepreneurs. So what are the advantages of blockchain in the supply chain finance? What are the pain points of the traditional model? What new business models can blockchain create to solve these problems? How should blockchain start-ups enter this field
Moody's, the world's famous bond rating agency, has given 127 blockchain cases, from points to transaction clearing, from document storage to supply chain management, from cross-border payment to supply chain finance, and various applications emerge in endlessly
among so many applications, supply chain finance has attracted much attention, and its commercialization has made rapid progress
this is because, first of all, the supply chain finance scene has a trillion level market scale, and the ceiling is high enough. Secondly, this scene naturally needs multi-party cooperation, but there is no traditional centralized institution in governance, and it needs to use blockchain to build trust. At the same time, technically, this scene does not need high concurrency, and the current blockchain technology can meet it
1. Supply chain finance is a trillion level market
supply chain finance refers to the comprehensive financial procts and services provided to the upstream and downstream enterprises in the supply chain by taking the core enterprises and their related upstream and downstream enterprises as a whole, relying on the core enterprises, taking real trade as the premise, and using the method of self compensating trade financing
according to the different financing collateral, financial institutions divide the supply chain finance into accounts receivable, prepayment and inventory financing, among which the scale of accounts receivable is particularly large< According to the data from the National Bureau of statistics, at the end of 2016, the accounts receivable of China's Instrial Enterprises above designated size were 12.6 trillion yuan, an increase of 10% over the same period of last year, which generated a huge financing demand for enterprises. Compared with the huge accounts receivable, China's annual commercial factoring volume was only about 200 billion yuan in 2015. It can be seen that there is still a large number of supply chain demand has not been met, so the development space of supply chain finance instry is huge
2. How to solve the pain point of supply chain finance with blockchain
pain point 1: the financing of small and medium-sized enterprises in the supply chain is difficult and the cost is high
because banks rely on the ability to control goods and regulate sales of core enterprises, for the sake of risk control, banks are only willing to provide factoring services to upstream suppliers (limited to primary suppliers) with direct accounts payable obligations of core enterprises, Or provide advance payment or inventory financing to its downstream distributors (primary suppliers)
as a result, the demand of secondary and tertiary suppliers / distributors with huge financing demand can not be met, the business volume of supply chain finance is limited, and SMEs can not get timely financing, which will easily lead to proct quality problems and damage the whole supply chain system
blockchain solution:
we issue and run a kind of digital bill on the blockchain, which can be split and transferred freely in the case of transparency and multi-party witness
this model is equivalent to making the credit in the whole business system conctive and traceable, providing financing opportunities for a large number of SMEs that could not have been financed, greatly improving the efficiency and flexibility of bill circulation, and recing the capital cost of SMEs
according to statistics, in the past, traditional supply chain finance companies could only provide financing services for about 15% of suppliers (small and medium-sized enterprises) in the supply chain, while after adopting blockchain technology, 85% of suppliers could enjoy financing convenience
pain point 2: as the main financing tool of supply chain finance, the use of commercial bills and bank bills at this stage is limited, and the transfer is difficult
the use of commercial bills is subject to the reputation of enterprises, and it is difficult to control the arrival time of bank bill discount. At the same time, if we want to transfer these bonds, the difficulty is not small
because in the actual financial operation, banks are very concerned about the legal effect of "Notice of transfer" of accounts receivable claims. If the core enterprise cannot sign back, banks will not be willing to extend credit. It is understood that the bank is very cautious about the legal effect of signing the "Notice of assignment" of creditor's rights, and even requires the legal representative of the core enterprise to go to the bank to sign it face to face. Obviously, this way of operation is extremely difficult
blockchain solution:
an alliance chain can be built between banks and core enterprises, which can be used by all member enterprises in the supply chain. By using the characteristics of multi-party signature and tamper proof of blockchain, the transfer of creditor's rights can get multi-party consensus and rece the difficulty of operation
of course, the system design should be able to achieve the legal notice effect of bond transfer. At the same time, the bank can trace the transactions of each node and draw a visible transaction flow chart
pain point 3: it is difficult for the supply chain financial platform / core enterprise system to prove its innocence, resulting in high risk control cost of the capital side
in the current supply chain financial business, banks or other capital sides are concerned about the authenticity of the transaction information itself in addition to the repayment ability and willingness of the enterprise, and the transaction information is recorded by the ERP system of the core enterprise
although ERP tampering is difficult, it is not absolutely credible. Banks are still worried that core enterprises and suppliers / dealers collude to modify information, so they need to invest manpower and material resources to verify the authenticity of the transaction, which increases the additional cost of risk control
blockchain solution:
as a "trusted machine", blockchain has the characteristics of traceability, consensus and decentralization, and the data on the blockchain has a time stamp, so even if the data of a node is modified, it can not cover the sky. Therefore, blockchain can provide an absolutely trusted environment and rece the cost of risk control on the capital side, Solve the bank's doubts about being tampered with information
3. How should blockchain companies cut into supply chain finance
in terms of market choice, we believe that blockchain start-ups should choose the segments with high enough ceiling, such as household appliances, automobile, retail, clothing, pharmaceutical instry, etc. On the one hand, these instries have a broad market, on the other hand, their supply chain management infrastructure is relatively perfect, and the early cost of block chain is relatively small
we believe that there are two modes for blockchain companies to enter supply chain finance
the first is to directly cooperate with core enterprises / platforms to provide them with the underlying solutions of blockchain. After accumulating enough data, they can provide financial services to the investors by building alliance chain Alliance chain mode)
in view of the fact that the blockchain itself can not solve the problem of risk control, enterprise level risk control still needs to focus on strong core enterprises at the present stage. At the same time, obtaining the support of core enterprises can also effectively solve the problem of customer acquisition, because a large core enterprise generally has thousands of various suppliers
at present, domestic blockchain companies start from core enterprises, including Bubi and Wanglu technology. Bubi has launched an alliance chain "Bunuo" for supply chain finance, linking banks, core enterprises and factoring companies. Bunuo is based in Guangzhou and Shenzhen, radiating southeast business, and digging deep into the field of supply chain finance, Previously, it signed a strategic cooperation agreement with Yigang
the second mode is to provide supply chain management services, such as traceability, tracking, visualization, etc., to integrate information flow, logistics and capital flow, and then engage in financial services Private chain mode)
this mode is equivalent to building an application scenario with blockchain. Just like Alipay, if Ma Yun did Alipay directly, it would be difficult to do so because there was no application scenario, so Taobao first served the real economy. With Taobao, Alipay emerged as a centralization trust scenario and grafted other applications on Alipay before accomplishments.
at present, among the domestic blockchain companies, bitse and food premium are the ones that adopt the supply chain service mode
for example, vechain provides a method of anti-counterfeiting and traceability, by implanting an NFC chip into each commodity, registering the commodity on the blockchain, so that it has a digital identity, and then recording all the information of the digital identity through the account book maintained jointly, so as to achieve the verification effect. At present, vechain procts have been connected with more than 10 instry benchmark customers, and millions of IDS are running on the chain
4. Build a supply chain financial exchange in three steps
from the perspective of implementation path, the application of blockchain in the field of supply chain finance can be realized in three steps
as a prerequisite, we need to build a blockchain + supply chain finance alliance, whose participants include supply chain finance platform, core enterprises, professional financial intermediaries, financiers, factoring institutions, etc
each participant needs to undertake corresponding obligations. For example, the platform is responsible for providing basic services such as supply chain information and customer information, while the core enterprise understands the instry situation, has control over the enterprises in the supply chain, and is responsible for risk control
professional financial intermediaries can integrate and analyze the platform information, and provide customized supply chain financial procts, such as personalized blockchain electronic bills. The fund side includes banks, Internet financial institutions and other customers who are responsible for docking the corresponding risk preference
after the establishment of alliance chain, we can start the three-step strategy
the first step is to put the data in the supply chain alliance on the chain, use the characteristics of blockchain to make it tamperable, and provide services such as data authentication and traceability
the second step is asset digitization, which turns warehouse receipts, contracts, and blockchain bills that can represent financing needs into digital assets, which are unique, tamper proof, and non reprocible
the third step is the transaction of digital assets. The supply chain financial platform will be transformed into a financial asset exchange, which will transform the non-standard enterprise loan demand into standardized financial procts for token, docking investment and financing demand, and concting value trading
finally, blockchain technology will effectively enhance the liquidity of supply chain financial assets, mobilize new financing tools and risk control system, help cover the long tail market of SME financing, and promote supply chain finance as a service.

2. Supply chain finance is a financial service in which banks manage the capital flow and logistics of upstream and downstream small and medium-sized enterprises around the core enterprises, transform the uncontrollable risk of a single enterprise into the controllable risk of the whole supply chain enterprise, and control the risk at the lowest level through three-dimensional access to all kinds of information
Supply Chain Finance (SCF) is a professional field of commercial bank credit business (bank level), and also a financing channel for enterprises, especially small and medium-sized enterprises (enterprise level)

it refers to that the bank provides customers (core enterprises) with financing and other settlement and financial management services, at the same time, it provides the convenience of timely collection of loans to the suppliers of these customers, or it provides its distributors with prepayment and inventory financing services In short, it is a financing mode in which banks connect core enterprises with upstream and downstream enterprises and provide flexible financial procts and services.)

the above definition is very close to the traditional factoring business and pledge business (chattel and chattel mortgage / pledge credit). But there are obvious differences, that is, factoring and mortgage are only simple trade financing procts, while supply chain finance is a systematic financing arrangement between core enterprises and banks, which is oriented to all members of the supply chain
the content of this article comes from the new complete book of Financial Law (Fifth Edition) published by China Law Press

3. Risk control of supply chain finance is the top priority, and the core of financial field must be risk control
in the financial field, the core must be risk control. If the risk control is not in place, the long hidden "thunder" will eventually break out. Around the core enterprises, we should manage the capital flow and logistics of the upstream and downstream SMEs, and transform the uncontrollable risk of a single enterprise into the controllable risk of the whole supply chain enterprise. Through three-dimensional access to all kinds of information, we can control the risk in the lowest financial services
1. Credit risk control
the credit of the capital side is upgraded through the core enterprise (not occupying the existing credit line), which is achieved through the purchasing or sales ability of the core enterprise in real trade. This is the core of the difference between supply chain finance and credit (that is, the traditional subject credit)
credit risk can achieve risk isolation (separation of financing business from non financing business) and risk transformation (business regulations, operational risk and moral risk) through trade background
2. Operational risk control
the perfection of operational system, the strictness of operational links and the execution of operational requirements can be solved by establishing corresponding "roles" and "permissions" through the
operational platform. The business process can be implemented according to the established workflow. The roles of operation and confirmation can be separated, and the key operation can be implemented by double post system
3. Information flow risk control
multiple security protection can be implemented for information and data security, trustworthiness and non tampering protection. Access to the network from supplier information, user rights allocation, security background login control, and real name authentication mechanism can be implemented, such as settlement account payment verification, binding mobile phone number, CFCA integrated security, ukey login binding, to ensure non repudiation of operation
CA certificate encryption and signature mechanism can be used for information flow, and electronic signature and electronic certificate can be generated for online electronic protocol
for systems with conditions for multi centralized deployment, mature blockchain technology scenarios can also be used to prevent data from being tampered with and store business information in a distributed way, so as to ensure information security perfectly and further improve asset credibility
4. Risk control of fund flow
risk control of e-bill, e-commitment letter, document issuing, business transaction, payment and settlement is the key link of risk control system. Electronic bills, documents can use "electronic seal" technology to generate tamperable data and use OCR identification technology to identify authenticity
transaction anti plication mechanism can prevent plicate transfer, plicate settlement, automatic early warning, and timely monitor business and account anomalies
formulate corresponding risk control rules and trigger conditions for transaction or payment settlement. Implement the risk control rules before, ring and after the event
the adoption of the accounting mole can also prevent the occurrence of risk transactions caused by business system errors.

4. Supply Chain Finance (SCF) supply chain finance, in short, is a financing mode in which banks connect core enterprises with upstream and downstream enterprises to provide flexible financial procts and services
the leading role of supply chain finance will always be banks, but the trading platform enterprises in various sub sectors will provide banks with risk pre-trial service and post loan supplementary management
the supply chain financial market has large space, high professional requirements, and the competition is not fierce, but the resource threshold is not low. It should be the key to obtain better financing resources.

5.

Supply chain finance is a professional field of commercial bank credit business (bank level), and also a financing channel for enterprises, especially small and medium-sized enterprises (enterprise level)

refers to that the bank provides financing and other settlement and financial management services to customers (core enterprises), and at the same time provides the convenience of timely collection of loans to the suppliers of these customers, or provides prepayment and inventory financing services to its distributors In short, it is a financing mode in which banks connect core enterprises with upstream and downstream enterprises and provide flexible financial procts and services.)

The financing modes of supply chain finance are as follows:

1

2. Instry information portal mode

3. Software company model

4. Logistics company mode

5. Traditional leading enterprise mode

extended information:

benefits of supply chain finance

1. New financing channels for enterprises

supply chain Finance provides solutions to the concept and technical bottleneck of financing for small and medium-sized enterprises, and the credit market for small and medium-sized enterprises is no longer out of reach

supply chain finance has come into the sight of financial executives of many large enterprises. For them, as a new financing channel, supply chain finance not only helps to make up for the traditional liquidity loan line compressed by banks, but also introces financing convenience through upstream and downstream enterprises, and their liquidity demand level continues to decline

e to the intensified competition in the instrial chain and the strength of the core enterprises, credit sales account for a considerable proportion in the supply chain settlement. The sale on credit has become the most extensive payment terms for enterprises. The existence of a large number of accounts receivable caused by the sale on credit, on the one hand, makes small and medium-sized enterprises have to face the risk of lack of liquidity, and the enterprise capital chain is obviously tense

on the other hand, as the potential capital flow of enterprises, the problems of information management, risk management and utilization of accounts receivable are becoming more and more important for enterprises

in the new situation, revitalizing enterprise accounts receivable has become an important way to solve the financing problems of small and medium-sized enterprises in the supply chain. Some commercial banks have made fruitful innovations in this field. The newly launched accounts receivable and accounts payable management system and online domestic factoring system of China Merchants Bank are the most concerned innovations

According to the proct director of the cash management department of the head office of China Merchants Bank, the system can provide comprehensive, transparent and efficient electronic accounts receivable management services and domestic factoring solutions for suppliers and buyers in supply chain transactions, greatly simplifying the complex operation process faced by traditional factoring operations, In particular, it is helpful to optimize the confirmation of creditor's rights transfer when the buyer and the seller are located in two places, and help the enterprise to obtain urgently needed funds quickly

2. The new channel of bank open source

supply chain finance provides a new channel to cut in and stabilize high-end customers. Through a package of solutions for members of the supply chain system, core enterprises are "bound" to the banks that provide services

the main reason why supply chain finance attracts international banks is that supply chain finance is more profitable than traditional business and provides more valuable opportunities to strengthen customer relationship. In the context of the financial crisis, the above reasons are more sufficient

the potential market of supply chain finance is huge. According to UPS's estimation, the stock of accounts receivable in the global market is about US $13000 billion, while the market potential of accounts payable discount and asset-backed loans (including inventory financing) is US $100 billion and US $340 billion respectively

people from China Merchants Bank said that under the mode of service and risk consideration of supply chain finance, as banks pay more attention to the trade risk of the whole supply chain, the evaluation of the overall trade will bring more small and medium-sized enterprises into the service scope of banks

even if a single enterprise fails to meet some risk control standards of the bank, as long as the business between the enterprise and the core enterprise is stable, the bank can not only conct independent risk assessment on the financial situation of the enterprise, but also credit the business and facilitate the realization of the whole transaction

The economic and social benefits are significant. Equally important, the economic and social benefits of supply chain finance are very prominent. With the innovation of "group buying" development mode and risk control means, the income cost ratio of SME financing can be improved, and the scale economy is obvious

according to statistics, through the improvement of collection methods, inventory revitalization and deferred payment under the cooperation of supply chain financial solutions, the largest 1000 enterprises in the United States reced their liquidity demand by $72 billion in 2005

similarly, in 2007, the largest 1000 listed companies in Europe recovered 46 billion euros from accounts receivable, accounts payable and inventory

4. Supply chain finance realizes the integration of multiple flows

6. The word should be new. The supply chain itself contains money

7. According to our development experience, we will introce the common mistakes and solutions in the architecture design of supply chain finance system
firstly, we should avoid stagnation in the architecture design of supply chain finance, that is, the architecture design only stays in the model stage, and constantly optimize the details to make the model more refined

secondly, in the design of supply chain financial architecture, over design often occurs e to entanglement in some aspects. In architecture design, we often spend a lot of time on a series of complex designs for some changes that will not happen at all. In this case, the design is called over design, which will lead to the waste of resources and increase the workload and difficulty of development. When designing the supply chain financial architecture, technical developers inevitably need to consider the scalability and maintainability of the system, but it is necessary to avoid over design. Maybe in most cases, you can't immediately judge which designs have over design and other problems. At this moment, you need to calm down, look at the whole situation, or consult other partners who develop together, and make decisions from the height of the whole project. I believe that thinking over design in this way will be very beneficial to solve the problems
in addition, developers in the design of supply chain financial system architecture should also understand that architecture is not just a framework, it is not a random assembly or combination of several frameworks or technologies, because the framework itself has architecture. Framework is a semi-finished proct in terms of reusability and extensibility of a certain aspect or field, and architecture is a process of forming framework. Similarly, it can also be understood as framework, which can be understood as software, a special kind of software, but architecture is not software
finally, the architecture design of supply chain financial system needs to understand that its architecture design is not just a new technology display platform, only the use of appropriate technology will be beneficial to the project, so the ability of developers and maintainers must be considered at the same time. This puts forward higher requirements for a system architecture designer, that is, more consideration should be given to how to balance the relationship among business requirements, team collaboration and technology, rather than just paying attention to those technical details.

8. To tell you the truth, those supply chain financial platforms are very reliable. It depends on which one you want to go.