We hear the term “blockchain” more and more often. But, what is it exactly and what sort of benefits can it bring to the financial industry?
Blockchain is a distributed register of blocks in which data is sequentially saved. One of blockchain’s features is that data once stored cannot be easily changed or deleted, because it is simultaneously saved for all system users. The procedure of introducing any changes whatsoever is very strict. Hence, the replacement or falsification of transaction history are practically impossible.
It is also worth mentioning that access to the reading of transactions documented in a blockchain can be limited only to entities involved in a transaction. Solutions of this type definitely benefit the financial industry, and especially the factoring business. In this case, a financial institution, factors, or fintechs can have a full insight into transactions between entrepreneurs, who are financed by a given institution in the form of factoring. If this technology is used properly, the factor will be able to easily check whether the transaction from the invoice is completed. This way, there will be no doubts about the invoice having been issued, the service provided, and the goods transferred. And, even more importantly, the factor will also make sure that the parameters cannot be changed by anyone else.
The possible benefits of blockchain for factoring:
- Access to the history of receivables registered in the system,
- A unique data model,
- Data security,
- The acceleration of credit processes by checking receivables more quickly.
A true challenge for the industry will surely be to build a “mass” of factors willing to participate in the blockchain project. However, the resulting benefits will not only decrease the industry’s susceptibility to potential frauds, but also accelerate the entire process of granting limits, verifying contractors, liability, or checking the correctness of documentation. Should factors express their wish to participate, the whole industry will undoubtedly profit from blockchain.
Factoring Product Manager at Comarch