Three factoring exchanges in India have joined hands to initiate and deploy a blockchain network. The new system, which went live this week, intends to provide a common platform for these exchanges to securely and confidentially share information, with the mission to reduce instances of fraud around receivables financing. The Reserve Bank of India had licensed the three entities, namely RXIL, A.TReDS, and M1xhange, to conduct the project.
By implementing a common blockchain platform, RXIL, A.TReDS, and M1xhange said they are looking to prevent double financing all the while not having to share specific elements of any invoice or client. This enables the exchanges to offer better rates across the board to all of their customers and provide access to capital for more businesses otherwise deemed too risky.
“Our clients are particularly sensitive about their sourcing inputs, and we absolutely could not broadcast any of their private information to a shared network,” said Kalyan Basu, managing director and CEO at A.TReDS.
“This technology however enables us to work together with the other exchanges to achieve shared goals without sharing specific data.”
Speaking on the commencement of the service, Kashinath Katakdhond, managing director and CEO of RXIL, said the solution provided a tool for mitigating systemic risk especially in trade receivable discounting.
“This is a simple and low cost technology innovation which helps us mitigate risks arising from multiple financing of the same bills across the platforms in addition to our existing risk management processes which provides a clear benefit. The real benefit will actually come when other financiers such as banks, NBFCs, and others join MonetaGo’s platform,” Katakdhond said.
The production blockchain was designed and implemented by MonetaGo. After several months of collaboration and testing, the solution was taken into production. “This is a significant milestone for blockchain technology and this is only the beginning,” said MonetaGo CEO Jesse Chenard.
Factoring is a form of financing that helps companies with cash flow issues due to slow-paying clients. It allows businesses to finance invoices, which improves working capital.
The Indian factoring market currently provides US$219 billion to micro, small and medium, yet there is still US$188 billion of unmet demand which RXIL, A.TReDS, and M1xhange were designed to address.
The exchanges count some of the biggest Indian banks and a number of foreign banks as funding sources. Each of them enable the discounting of invoices from corporate organizations, government departments, and public sector undertakings.