In a recent development, a cloud based application, one of the first projects of its kind outside of traditional banking has debuted in India. This Blockchain Solution by Mahindra, one of the largest diversified multinational group of companies based in India and IBM, has the potential to reinvent supply chain finances across India. It would do so by enhancing security, transparency and operational processes.
This cloud-based application is designed to transform supplier-to-manufacturer trade finance transactions through a permissioned distributed ledger. The blockchain-based supply chain finance solution will enable all parties involved in the transaction to act on the same shared ledger, with each party updating only their part of the process, ensuring efficiency, consistency, trust and transparency, while safeguarding sensitive information.
Why is it needed?
Invoice discounting, the process of bundling and selling invoices at a discount, is a major source of working capital finance for many suppliers. This new solution aims to enable more suppliers to access credit, with the goal of driving more financial inclusion throughout the supply chain.
Supplier-to-manufacturer invoice discounting processes have historically been said to be difficult, slow and risky, requiring each party to maintain and manually update separate ledgers. Human errors during this process have been known to create inconsistent records, ultimately resulting in delayed payments and capital that cannot be accessed.
“The Mahindra Group is pioneering the use of blockchain to disrupt its traditional businesses and drive future growth. We are actively looking at other applications across the Group in financial services, auto, mobility and agritech,” said Anish Shah, Group President (Strategy), Mahindra Group. “This proof of concept represents a significant step forward in making blockchain, still a new technology, a more compelling and efficient supply chain solution for Mahindra Finance’s small and mid-sized enterprises loans business. Working with IBM, we will work to build, test, scale and refine this solution over time.”
Blockchain technology can help enable Mahindra Finance access transactions recorded on a shared ledger in near real-time, enabling it to develop and offer new products to small and mid-sized enterprises. This is a radical process and technology shift which has the potential to drive business growth into the future.
“Blockchain is poised to revolutionize business like the Internet did, and IBM is at the forefront of the revolution. We offer a comprehensive enterprise-class blockchain solution that is secure, scalable and reliable. The work with Mahindra has the potential to fundamentally transform the way businesses interact with one another and their customers and suppliers, and we’re confident that this engagement can be replicated not just in the finance industry but across other sectors as well,” said Lula Mohanty, Managing Partner of IBM Global Business Services, IBM ISA.
IBM is rapidly expanding its blockchain consulting services and capabilities and actively working with clients to understand what it takes to make Blockchain ready for business.
IBM is committed to advancing the science of blockchain, helping to remove complexity, and making it more accessible and open. Financial services, supply chains, trade finance and logistics, IoT, risk management, digital rights management and healthcare are some of the areas that are poised for dramatic change using blockchain networks.
What would Cloud-based blockchain app ensure?
- Speed-up invoice discounting
- Avoid human errors hence ensuring consistent records
- Do away with delayed payments
- Would enable parties involved in the transactions to act on same shared ledger, and updating only their part of the process
- Infuse trust and transparency into the supply chain financing process
- Overall an efficient supply chain solution for Mahindra Finance’s small and mid-sized enterprises loans business.