As members of CEP will be aware, one of the key use cases for blockchain technology is in trade services, which includes a variety of things such as documentary and regulatory services, contract management, trade finance and so forth.
Also there are only some early stage commercial networks and a fair amount of pilots underway, there will be some substantial growth in the use of blockchain for trade services in this coming decade. In the indicated release at Cision PR Newswire, we see a new supply chain finance (SCF) partnership announced between Japanese entities SSNB (a digital bank) and DLT Labs, a technology provider including blockchain.
‘SBI Sumishin Net Bank, Ltd. (SSNB), Japan’s No. 1 digital bank, and DLT Labs Japan Incorporated (DLT Labs), a wholly-owned subsidiary of DLT Global Inc., have entered into an agreement to jointly offer a blockchain-centric supply chain financing network across Japan, with wide application to industrial and banking partners, as well as directly to clients. The supply chain financing network will be powered by DLT Labs’ award-winning blockchain development platform and will provide end-to-end supply chain financing that is seamlessly integrated with clients’ supply chains….DLT Labs’ blockchain-centric network comprises the largest industrial-grade blockchain network in production to date globally and is the national standard for freight management and payments at Walmart Canada.’
In this case it appears like a brief pilot will be underway, followed by a full commercial launch sometime thereafter, although no specific date is provided. There is no detail about the type(s) of SCF to be utilized, but in our research the most popular form is reverse factoring, whereby the 3rd party financing decision is based on the buyer’s credit worthiness.
Other types such as factoring and receivables finance are based on the assets or supplier credit. Permissioned blockchain networks are primed for this type of use case activity since an immutable series of transaction records are secured and each verified completed step along the logistical trail can automatically kick off another transaction, such as a financing request.
The issue we have pointed out before is the lack of interoperability between the multitudes of independent blockchain networks on the horizon. We’ll see many more of these types of announcements going forward.
‘A select group of Tier 1 retailers and carriers in Japan have been invited to pilot the supply chain financing network starting in Q2 2021. Shortly thereafter, the network will be fully commercialized and made available across Japan. This digital transformation and process automation is anticipated to enable all network participants to experience the same significant competitive advantage obtained by other network users internationally, including new revenue streams from on-demand financial services and material operational savings for all participants….Utilizing the same network architecture, a platform for construction and mortgage supply chain financing is planned for commercial deployment.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group