Indian Factoring Exchanges that includes three exchanges -- A.TREDs, RXIL and M1xchange along with MonetaGo have launched a blockchain network in India to prevent financial fraud and double invoicing problems.
The production system 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.
Receivables financing is one of the fastest growing and most efficient trade finance mechanisms for small businesses to gain credit. The Reserve Bank of India (RBI) licensed three entities to provide a more efficient venue to do this -- RXIL, A.TReDS, and M1xchange.
These exchanges provide competitive marketplaces for small businesses to obtain the best financing possible. The platforms count some of the biggest Indian banks and a number of foreign banks as funding sources and enable the discounting of invoices from corporate organizations, government departments, and public sector undertakings.
By implementing a common blockchain platform the exchanges eliminate instances of double financing – leading to better rates across the board – without sharing specific elements of any invoice or client.
“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,” said Kalyan Basu, MD & CEO - A.TReDS.
The company which designed and implemented the production blockchain is MonetaGo. This application of blockchain technology, which avoids tokens or cryptocurrencies for both regulatory and cost forecasting reasons, has the potential to drastically reduce fraud related to invoice financing across India and in other regions where it is adopted. Importantly, it also provides the opportunity for the participants to build additional functionality on the new network.
“With the implementation of the MonetaGo blockchain solution we have 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,” said Kashinath Katakdhond, MD & CEO - RXIL.
“We are constantly evaluating new methodologies and technologies which we believe will fit into our long term product road map” said Sundeep Mohindru, Director and Founder - M1xchange. “There has been a lot of press about blockchain in the last few years however this was the first time we could apply it in day to day operations and enhance the control over duplicity of transactions.”
After several months of working together 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.