Reverse factoring has made it easy for many large organizations to provide financial assistance to their suppliers. However, this approach tends to be less effective in longer supply chains.
A possible solution can be found in the world of decentralized finance (DeFi), where the buyer’s payment guarantee can be recorded on a non-fungible token (NFT) that can be verified by every participant in the chain.
These factors offer a robust, highly scalable and extremely cost-effective means of value transfer
Tokenizing payment guarantees of large buyer invoices reaches deep into the supply chain. There is the technical challenge of creating a working NFT and a financial mechanism to incentivize suppliers at each stage of the supply chain to pass the NFT on to their own suppliers is also needed. This could take the form of a spread coded into the NFT smart contract.
Effective know-your-customer (KYC) is also necessary for all participants in the chain to ensure compliance with anti-money laundering (AML) and sanction-screening regulations.
“The combination of these factors offers a robust, highly scalable and extremely cost-effective means of value transfer, which has the potential to transform the payment-guarantee market,” says Jose Neif, head of BCB Labs at BCB Group.
