B2B Payments

Blockchain Makes It Out Of Piloting — Now What?

The blockchain hype-machine is driven largely from the technology’s proponents that say they have an application of the tool for everything: payments, risk mitigation, contracts, KYC (Know Your Customer) compliance, financing, cloud storage, an alternative to foreign exchange, credit underwriting. And that’s only the corporate finance space.

While some say that machine is blowing smoke, others say the excitement over blockchain is valid the market is simply figuring out exactly which use cases will truly take off. If 2017 was the year of blockchain experimentation, 2018 is the year that makes or breaks some of those projects, with a lucky few emerging from pilot tests and into the real world.

Only a handful of working blockchain applications are live today. One of them is the blockchain platform developed by we.trade, a solution designed for banks to facilitate trade transactions for their corporate clients. Corporates use the platform to initiate trade orders, manage the order-to-payment process and configure contract agreements, aiming to present a simplified way to manage a complex, traditionally manual process for both corporates and their banks.

Earlier this month, we.trade announced its platform is now live with 10 partner banks. The rollout saw seven trade transactions conducted by 10 companies across five different countries with four banks, we.trade said in its announcement.

But the development of the solution doesn’t end with a live launch, explained Roberto Mancone, chief operations officer at we.trade. Indeed, since the company was first formed by a consortium of banks, the firm’s objectives have shifted based on customer demand, additional use cases and more.

“It’s a moving target, for sure,” Mancone said of the firm’s evolving goals. While the firm has held fast to its initial objectives to streamline trade transacting, contracting and financing, the project has had to remain flexible.

For instance, Mancone explained, we.trade initially had small- and medium-sized businesses (SMBs) in mind as prime targets for the blockchain platform. But large corporates, struggling to manage thousands of supplies in a global supply chain, perked up with interest at the firm’s solution, so we.trade adjusted its strategy to target the inefficiencies of multinational conglomerates.

That shift represents the blockchain industry’s need to remain flexible as innovators of the technology work to prove that distributed ledger technology (DLT) is more than hype. That will be difficult to achieve, considering ongoing doubts that blockchain is as powerful and versatile as it claims to be. Earlier this year, the U.K.’s Parliament Treasury Committee heard testimony from the Center for Evidence-Based Management’s director Martin Walker, and he had choice words for blockchain.

The technology, he said, is no more real than “pixie dust” or “magic wands.”

“There’s a big problem in the blockchain world of confusing ‘could’ for ‘is,’” he stated, adding that there is “little to nothing” in the way of demonstrable benefits of the technology.

The emergence of actual, working blockchain solutions would beg to differ. However, executives may not be convinced just yet. Gartner’s 2018 CIO Survey found most companies don’t have plans to adopt blockchain technology, and only 1 percent have already implemented the technology in one form or another.

According to Mancone, it’s true that there is a hype around blockchain, and it’s exacerbated by a lack of understanding about how the technology works.

“There is a lot of uncertainty in the market when people talk about blockchain  not everybody is an expert,” he said. “People tend to confuse blockchain with cryptocurrencies. There are a lot of doubts around it.”

Though most CIOs surveyed by Gartner don’t plan to implement blockchain technology, Mancone said that the technology allows for businesses to use DLT without necessarily knowing it. The beauty of working blockchain solutions is that banks can offer them to their corporates, while those end users don’t necessarily have to understand the underlying infrastructure to make use of the solution.

What matters, he noted, is solving a problem for a client.

In we.trade’s case, that means streamlining and heightening visibility for the dizzying number of processes involved in a single trade agreement. For corporate cross-border trade, management and movement of information is just as important as management and movement of money.

Mancone explained that, often, trade agreements can be complex  requiring a portion of payment when goods leave a manufacturer’s warehouse, a portion of payment when they reach customs, a portion of payment when goods arrive at a buyer’s warehouse and so on. Not only must all parties involved have visibility into progress made on the movement of goods, but aspects of a contract must be executed based on that progress. For we.trade, blockchain can facilitate the maintenance of contractual agreements using Smart Contract technology, and trigger instructions to banks to initiate payments based on the progress of an order.

With the solution now live, Mancone noted that we.trade will have to continue to be willing to adjust its offering to hit that moving target, particularly as third-party FinTech firms, service providers, members of the insurance industry and other companies express interest in applying the platform for their own sectors. Focusing on widespread market adoption will also mean continued efforts to work with more banks, expand into new geographies and cooperate with regulators  which, Mancone said, have been supportive of the tool.

“There has been a lot of confidence on their part,” he said, adding that FIs providing the necessary KYC, data security, encryption and other compliance efforts eases barriers to expansion for the blockchain firm.

As for end users, successful adoption of the platform will rely on making sure the solution can fit their needs and additional use cases as they emerge.

“In future months and years, we’ll be able to develop something that matches their expectations,” Mancone said.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.