The landing strategy and development trend analysis of blockchain supply chain finance

Problems facing supply chain finance

Difficulties in integrating the four streams lead to: difficulties in corporate financing, difficulty in bank risk control, and difficulty in government supervision

Difficult to integrate the four streams: the law stipulates that some business information between enterprises needs to be transmitted in the form of paper notes, and information Internet technology will cause problems such as untrustworthy data security and untrustworthy data accuracy when building information systems between enterprises. The lack of a unified business information system among enterprises makes it difficult to integrate the four streams, resulting in difficulties in lending to small and medium-sized enterprises, difficulty in bank risk control, and difficulty in supervision by relevant departments.

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financing model

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policy

policy

Policies such as "reducing the RRR and supporting banking financial institutions to issue small and micro enterprise loan asset-backed securities" have provided convenience for the development of supply chain finance on the capital side, but the business side still faces problems such as difficulty in risk control and credit granting to small, medium and micro enterprises. At present, it is necessary to rely on new technologies to change the traditional business model, reduce the difficulty of risk control, and help more companies achieve supply chain financing with the help of core corporate credit.

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Supply and demand comparison

The difficulty of obtaining loans for small enterprises is particularly serious, and the traditional supply chain financial business model is less effective in solving the problem of financing difficulties for small and micro enterprises

Analysis of the following index trends shows that it is difficult for enterprises to obtain loans, especially for small enterprises. Small enterprises lack a sound management mechanism and their financial statements are not standardized. It is difficult for banks to conduct effective risk control through the information they provide. However, under the supply chain financial model, the credit of the core enterprise can only be passed on to the first-tier suppliers, and multi-tier suppliers cannot use the credit of the core enterprise for loan financing, which has limited ability to solve the problem of difficult loans for small enterprises.

Index trend analysis:

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market size

market size

"Whether you need a loan" and "whether you can get a loan" are two factors that affect the size of the supply chain finance market. However, enterprises that "need loans" will face the problem of "not being able to borrow". By solving the problems existing in the traditional supply chain financial model, more "non-loanable" enterprises can realize "loanable", which can release the market scale.

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Inductive analysis

In summary, supply chain finance faces the following four types of problems and their reasons:

1. Risk of counterfeiting: paper bills are easy to counterfeit, supply chain management is not perfect, and it is difficult to integrate the four streams;

2. Isolated islands of enterprise information: there is a lack of efficient and effective connection methods among enterprises, banks, and regulators;

4. High risk of contract performance: lack of effective supervision and difficult contract execution

Blockchain + supply chain financial business model and value analysis

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Blockchain + supply chain financial solutions

Four-stream on-chain: data is more reliable, online operation: business is more efficient

At present, in the industry, blockchain + supply chain finance has not formed a standardized solution. Different data management methods are one of the main differences. The overall innovation and optimization of business is mainly reflected in: certificates can be dismantled and transferred at multiple levels, Online business execution, data storage on the chain.

1) Maximize the realization of the integration of four streams, the block chain is difficult to tamper with, making the data highly credible, reducing the difficulty of corporate financing and bank risk control; 2) Online business execution such as risk control data acquisition, contract signing, bill circulation, etc. The cycle is short and the efficiency is high; 3) The certificate can be dismantled and financed at multiple levels to solve the problem of financing difficulties and fund shortages for non-first-tier suppliers; 4) The smart contract solidifies the fund liquidation path, which greatly reduces the occurrence of defaults such as intentional arrears of funds.

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reverse factoring

Voucher dismantling and financing: solving the financing difficulties and shortage of funds for multi-level suppliers

In the reverse factoring business, in addition to the difficulty of integrating the four streams, the credit of the core enterprise can only be passed on to the first-tier suppliers, while the multi-tier suppliers cannot use the credit of the core enterprise to make loans. The blockchain solution can realize the disassembly and transfer of electronic certificates: replace the paper commercial paper in the traditional business model with electronic certificates on the chain. Electronic vouchers can be split, and downstream suppliers holding vouchers can use all (or 1/n) vouchers to pay upstream suppliers, which can be discounted and financed.

Analysis of the value of electronic vouchers (dismantling and transfer financing):

1. Solve the credit problem of multi-level suppliers: the prevalence of credit sales has caused a large funding gap for upstream suppliers, and it is difficult to obtain high-quality bank loans without the endorsement of core enterprises. Traditional paper bills cannot be split and can only be circulated between the core enterprise and the first-tier supplier; while the electronic certificate on the chain can be split and transferred from the first-tier supplier to the second-tier (and multi-tier) supplier, so that the core enterprise credit Pass to multi-tier suppliers. The problem of shortage of funds for suppliers due to credit sales has been resolved.

2. High discounting efficiency: Offline paper bills become online electronic certificates, and the trade and financing cycle is greatly shortened, (discounting) is theoretically 0-12 hours.

4. Optimize the financial management of core enterprises: Under the traditional model, suppliers may ask core enterprises to cash in payments at any time due to financial shortages. Voucher dismantling and financing can relieve the supplier's financial pressure, thereby optimizing the account period of core enterprises, reducing the pressure of negotiation and redemption, and optimizing cash flow and balance sheet.

ARIF

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The electronic warehouse receipt certificate on the chain solves the risk of counterfeiting paper warehouse receipts

ARIF (accounts receivable and inventory financing), inventory and accounts receivable financing, is the basis of commercial loans based on asset control. Usually inventory accounts for 30%+ of the operating cost of the entire supply chain. Warehouse receipts without repeated mortgages, authenticity, and cargo monitoring are the key to warehouse management. Comprehensive and credible data is the key to bank approval. We start the analysis with the intervention mode of supply chain companies:

Blockchain + ARIF value analysis:

2. Reduce the loan difficulty of supply chain companies: Compared with IT online systems, the difficult-to-tamper feature of blockchain makes the data on the chain credible, and it is easier to obtain the trust of banks, which reduces the difficulty of loan for supply chain companies.

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Supply Chain Finance ABS

Supply Chain Finance ABS Faces Problems & Blockchain Solutions

Supply chain finance ABS faces problems:

Operations Management:

1. High offline collaboration costs for SPVs, securities firms, law firms, banks and other institutions;

2. Institutional systems are independent, data acquisition costs are high and accuracy is low;

3. There are a large number of underlying assets, and screening, review, and asset transfer contracts rely on paper documents and manual operations, which are costly, long-term, and error-prone;

Risk Management:

1. The transaction structure is complex, the transaction volume is large, the frequency is high, and the manual reconciliation and liquidation is inefficient and poor in accuracy;

2. It is impossible to realize the dynamic and penetrating supervision of a large number of assets (usually law firms, accounting firms and other institutions conduct spot checks on about 10% of the underlying assets), and the risk is high.

case analysis:

As mentioned above, it is a blockchain supply chain financial ABS full-stack solution, which needs to coordinate all participants to go on the chain, and it is difficult to implement and operate. Satisfying (1) & (2), it is regarded as a valuable non-full-stack solution.

(1) The underlying assets are fully uploaded to the chain;

Value Analysis:

1. Compared with pure manual work and relying on paper documents, the blockchain system realizes electronic bills, which is difficult to counterfeit and has high efficiency;

2. For structural data such as remittance data and cyclical purchase data, reports can be automatically generated, and the research efficiency is high; 3. Blockchain distributed storage, bottom assets are transparent, and automatic account book auditing can be realized on the chain, maximizing the realization of wear and tear Transparent regulation;

5. Combining 3&4, it improves the efficiency of risk pricing and the liquidity of the secondary market.

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Permeability increment

The blockchain+supply chain financial solution enables multi-level credit transfer of core enterprises, enhances cargo monitoring capabilities and credit risk pricing capabilities, and then improves the market penetration of accounts receivable and ARIF in different ways, combined with accounts receivable The ratio of the total amount to the total inventory, and then obtain the overall market penetration rate of supply finance.

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Market Size Increment

By 2023, the blockchain can bring about 3.6 trillion increments to the supply chain financial market, mainly from the accounts receivable side

Under the traditional business model, we use the 20% market penetration rate as the standard to evaluate the market size.

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Cost reduction & efficiency increase

Under the traditional business model, for bank-led and non-bank-led supply chain financial products, banks can obtain approximately 2.5% and 3% (accounting for financing amount) respectively, and operating costs account for 1.5% (accounting for financing amount). Chain solutions can reduce operating costs such as customer acquisition and data acquisition, thereby reducing operating costs and increasing profit scale. Based on comprehensive industry surveys, iResearch believes that operating costs will drop to 0.9% (accounting for financing amount) in a more rational situation.

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Analysis of the advantages of blockchain technology

Compared with other technologies, blockchain + supply chain finance is the optimal solution, which can maximize cost reduction, efficiency increase and increase in market size

How to achieve: How blockchain + supply chain finance can reduce costs, increase efficiency, and increase market size (increased market penetration rate)

1. The blockchain builds an inter-enterprise trade system to realize the integration of four streams; on this basis, through the detachable and refinancing accounts receivable certificate, the credit of the core enterprise is transferred to the multi-level suppliers; blockchain + Internet of Things +ARIF makes the risk of inventory financing more controllable and promotes ARIF financing and lending; comprehensive: market penetration and market size have increased;

2. Through the blockchain system, the cost can be reduced in business operations such as trade data acquisition and verification, so as to achieve cost reduction and efficiency increase.

Summary: Blockchain has become the preferred technology to solve supply chain financial problems, which can maximize cost reduction, efficiency increase and increase in market size.

Blockchain technology service providers can provide technical services such as security testing tools and R&D tools. In addition, secondary development or complete self-development of open source projects is also a technical choice, but the stability of open source technology architecture is poor (for example, after Hyperledger iteration, the new The version is not compatible with the old version), and the cost of self-developing the underlying platform is too high. Comprehensive analysis, technical service providers become a relatively better choice.

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Business Model Analysis

The business model of multi-party joint construction and joint operation has gradually become the mainstream

The following describes the realization of its own business model from the perspective of technology, enterprises, and capital as the initiator of the platform. From the perspective of the composition and operation of the participants in the blockchain supply chain financial network, it can be divided into two types of models: unilateral construction of the operation model, Multi-party joint construction operation mode.

The multi-party joint construction operation mode has gradually become the mainstream, and its advantages lie in:

1. Strong resource scalability: multi-party consensus and high degree of transparency can attract more high-quality resources (technology, capital, corporate customers);

2. Low unilateral investment: Participants only need to provide their own resources, which is much lower than the cost of unilaterally establishing a network;

3. The comprehensive risk is relatively low: the overall experience of multi-party participation is rich, and the comprehensive anti-risk ability is relatively strong.

For industry participants with strong resources, or even no external resources at all, they will still choose to build an operation model unilaterally, and the number of such enterprises is relatively small.

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Business model faces problems & suggestions

In response to the above problems, the report makes the following recommendations:

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"Five-step rule" analysis

In summary:

1. Elicited from dimension 1: data management (privacy protection) technical implementation solution analysis & technical selection suggestions;

The report below analyzes the above two issues:

Data Privacy Protection Analysis

status quo:

The single-chain mode has become the current mainstream solution due to its low deployment cost, high operational efficiency, and good scalability. However, the single-chain mode cannot achieve complete data isolation. Even if the data is stored locally and the data features are uploaded to the chain, there are still data features Risk of disclosure.

View:

As the number of participants in the blockchain supply chain financial system increases, trade scenarios become more and more complex, which will increase the risk of data disputes, and technology selection becomes the key.

suggestion:

Technology selection priority: data ownership, complete isolation of control rights > local storage, feature on-chain > privacy protection in single-chain mode (hardware privacy protection > algorithm privacy protection)

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The risk of disputes affects certificate dismantling and financing

The supplier was sued for economic disputes with other companies, and the payment of the certificate was suspended

problem statement

In the following scenario, the vouchers are distributed to more than 20 multi-level suppliers in the form of fragments, and about 60% of them initiate financing applications to the funders in the network based on the full amount/part of the fragments of the vouchers. The total financing amount exceeds 10 million yuan, and most of the financing Valid for 7-8 months. In the case of an economic dispute between the first-tier supplier and other core enterprises, the competent authority requires the financial department of the core enterprise to stop payment, and pay the 30 million payable under the voucher to other accounts after the voucher expires;

Situation 1: If the payment is stopped according to the requirements of the court, all holders (including core enterprises) under the certificate will be greatly affected;

Situation 2: If the core enterprise and the voucher financing party do not pay, the technology will directly become overdue;

Situation 3: If you use your own funds to pay, you will suffer greater economic losses.

Analyzed:

▲ To solve the impact on the use of corporate funds during the voucher freeze period, the suggested solution is (the operator) to establish bridge funds/temporary risk emergency funds, and lend to affected companies at low (or zero) interest rates. Before the vouchers are unfrozen, Ensure that the company's capital turnover and network operations are not affected.

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Credentials flow blocked

The credential receiver has doubts about the credit of the issuer (core enterprise) and hinders the circulation of credential

problem statement

Scenario description: The electronic certificate issued by core enterprise A, after multi-level transfer:

1. Transfer to a supplier in the industry chain that is far away from the core enterprise A;

Explanation: The necessary and sufficient condition for the above-mentioned second type of scenario (cross-flow) to occur is that the two supply chains of core enterprise A and core enterprise B are in the same chain or isomorphic chain, and it is realized by cross-chain technology. This scenario can be realized theoretically, but at this stage, there is little demand for the implementation of this type of scenario, and there are only a few implementation cases.

Account issue

Problem statement:

When the voucher is transferred to a certain level of supplier, it will refuse to accept the voucher because the account period is not suitable.

The voucher is an account receivable that has not been factored (or reverse factored), and cannot be cashed until it is due. The recipient of the voucher is in urgent need of cash flow, but is unwilling to factor it himself, so he refuses to accept the voucher.

solution:

Voucher activation

Problem statement:

Solution suggestions:

1. As T and N increase, platform industry resources increase

2. Seeking optimal resources and productivity is a rigid demand of enterprises

Comprehensive and distributed business models become the future trend

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Policy, Regulatory Advice

Blockchain + Supply Chain Finance: Policy and Regulatory Suggestions

Policy:

1. Guide the industry and academia to have a correct understanding of blockchain technology, encourage enterprises to cooperate with universities, and promote the combination of industry and academia. Strengthen the application of supply chain financial innovation model;

2. Encourage core enterprises to cooperate with commercial banks and blockchain technology service providers, integrate upstream and downstream industrial resources, and jointly promote the implementation of blockchain + supply chain finance;

3. Strengthen the talent encouragement policy, attract more high-tech talents to join the blockchain industry, and promote the innovation of cryptography, consensus algorithm, cross-chain, privacy protection and other technologies;

4. Standardize the services of the real economy, provide efficient, safe and convenient channels for funds to enter the real economy, play the roles of financing service platforms, unified registration and publicity systems for movable property financing, and support the development of blockchain + supply chain finance;

5. Encourage open source development, increase the amount of open source code contributions to Chinese blockchain projects, and strengthen the international discourse power of Chinese blockchain technology;

6. Promote the development of industry and technology alliances, promote the establishment of blockchain technology standards, and solve the technical landing obstacles caused by the inconsistency of development languages ​​and smart contract standards;

7. Encourage enterprises, institutions or individuals to apply for blockchain patents, and guide the protection of intellectual property rights.

Regulatory aspects:

1. From the perspectives of blockchain technology development trends, data protection, and financial risks, standardize technology and business supervision;

2. Strengthen the review and audit of smart contracts.