India’s first blockchain-based network went live last week, when three online bill-discounting exchange platforms came together and implemented a solution for their operations to deter fraud.
The three platforms that offer Trade Receivables Discounting System (TReDS) — Receivables Exchange of India (RXIL), A.TReDS, and M1xchange — implemented the use of blockchain in the enterprise financial segment. The exchanges are marketplaces to which small businesses bring invoices to obtain financing from large Indian banks and several foreign banks. The exchanges sought a way to reduce fraud.
Notably, TReDs is an electronic platform that allows auctioning of trade receivable. The process is also commonly known as ‘bills discounting’, a financier (typically a bank) buying a bill (trade receivable) from a seller of goods before it’s due or before the buyer credits the value of the bill. In other words, a seller gets credit against a bill which is due to him at a later date. The discount is the interest paid to the financier.
The Reserve Bank of India (RBI) had introduced TReDS to facilitate financing trade receivables of micro, small and medium enterprises (MSMEs) from corporate buyers through multiple financiers.
The system, which is live now, provides a common platform not controlled by any one financial institution to securely and confidentially share information which reduces fraud around receivables financing. The platform is built on Hyperledger Fabric and does not rely on cryptocurrencies to operate.
“The project has been implemented without any cryptocurrency being used for settlement. Globally there are very few examples of actual live production blockchain networks at this point,” said Jesse Chenard, chief executive officer and founder of MonetaGo, which implemented the project.
MonetaGo is a US-based blockchain firm that works with central institutions and financial organisations globally to implement blockchain.
All the three platforms, which work independently, are interlinked with blockchain and share data. The blockchain solution had gone live on March 23 and so far 1,400 invoices have been processed on it
The implementation of blockchain will be helpful in MSMEs getting better rates and discounts.
With three active exchanges, buyers as well as sellers could register on all three platforms, thus raising the chances of the same bill getting discounted twice. However, with Blockchain this will not happen.
Kalyan Basu, MD. & CEO, A.TReDS added, “Our clients are particularly sensitive about their sourcing inputs, and we absolutely could not broadcast any of their private information to a shared network. This technology however enables us to work together with the other exchanges to achieve shared goals without sharing specific data. I look forward to the day when other players in the financial services industry also appreciate the value add in terms of preventing frauds related to Bill Discounting and become a part of this system.”
The above development was first reported in CXOToday.
To recall, in an another India’s first Kerala Blockchain Academy of state-run IIITM-Kerala has become the first Indian Institution to get membership of Hyperledger Project.
In July 2017, Aurovine, a blockchain-based music sharing platform was launched in India. In the same month, Bajaj Allianz General, a private general insurance company in India, started using blockchain technology to fasten its claim settlement process.
Last October, Andhra Pradesh became the first state in the India to pilot blockchain technology in two departments – land records and transport. In the same month, IBM joined hands with five banks – UBS, Bank of Montreal, CaixaBank, Commerzbank and Erste Group – to launch a blockchain-based trade finance platform called Batavia, which aims to support trade finance transactions by helping banks and their clients automate the trade finance process, something which still majorly remains manual and paper-based.
Last year, we covered various stories on how the blockchain is invading financial institutions like banks and electronic voting systems in several countries, including India. Recently, we also carried an article about how Blockchain is blurring the lines between technology and nature through a new species called Plantoid, a new digital plant, which is designed to reproduce itself via transactions made on the blockchain.