[Editor’s Note: Last week Ardent’s Chief Research Officer, Andrew Bartolini, and Research Director, Bob Cohen, met with Tradeshift CEO Christian Lanng to discuss his company’s new announcement related to blockchain and B2B finance. Below is an overview of their discussion.]
Tradeshift, the California-based provider of cloud-based business networks, was founded in 2010 with a focus on eInvoicing and the development of a commerce network. Over the years, the company was able to develop a Procure-to-Pay (P2P) solution suite, as well as a large business network/platform that enables transactions, communication, and interaction between trading partners. The network is an open platform that enables third-party providers to develop and offer their own applications to organizations on the Tradeshift network. Last week, we sat down with Tradeshift CEO, Christian Lanng, to discuss the company’s recent announcement regarding Tradeshift Pay, a blockchain-based end-to-end supply chain payments and finance solution for B2B commerce, and Tradeshift Cash, the new application created to integrate blockchain payments on the Tradeshift Pay solution.
Blockchain Technology on the Tradeshift Platform
Our discussion with Christian focused on the way Tradeshift is using blockchain technology to bolster its services in the areas of Supply Chain Finance (SCF) and B2B payments. Blockchain is a digital database that captures and aggregates records (or “blocks”) that can function as a ledger used to facilitate business processes involving multiple parties. It is a technology that can record transactions between two parties efficiently and in a verifiable and permanent way. Each block contains a time stamp and link to a previous block, so as the record is updated it creates a chain.
What Tradeshift has done is leverage this state of the art new technology, and craft an application to be utilized on its platform. Tradeshift has created a two-way blockchain gateway that can be opened up within the Tradeshift platform. This gateway will serve as a secure ledger/digital document of record for activities such as communication, transactions, and interaction between buyers and suppliers.
The Tradeshift Cash Application
With Tradeshift Cash, the company has created a unique application that sits on top of its blockchain gateway, and will be used to integrate blockchain payments with Tradeshift Pay. It will also allow suppliers to leverage blockchain technology to mirror, or capture, the key information from SCF activity. A Supply Chain Finance program is an early payment discount technique that uses third-party capital, typically from a financial institution or third-party lender, to pay an invoice early instead of from internal buyer funds. Tradeshift Cash will allow participants (both the buyers and suppliers) to utilize the blockchain to serve as the record of the transaction and cut out the middleman. This should enable faster processing times, as blockchain technology can settle transactions in minutes or even seconds. It should also create better visibility into trade expectations, as blockchain fosters transparency and trust by bringing multiple parties together in secure transactions.
Tradeshift Cash uses tokenization, the process of converting rights to an asset into a digital token on a blockchain (like trade receivables), in order to enable a new class of liquid financial objects. As a result, blockchain can support settlements between two parties directly, without third-party middlemen becoming involved with the balances. All of this is based on transparent smart contracts that allow for full flexibility in mixing properties from assets. In this scenario both the buyer and supplier will be able to make the decisions about cost of payment.
Final Thoughts
Blockchain technology has been a hot topic that Ardent Partners has been writing about for some time (read up here, here, here, or here). It is exciting to see a solution provider in the ePayables landscape leverage the technology and bring it to market in a practical way. After a while, the hype around a new technology must meet the reality of delivering true value. The Tradeshift Cash application making a practical use of blockchain is one of the first applications we have seen do so in the ePayables space. Tradeshift currently offers its users access to over 200 apps developed by third-party providers within sourcing, analytics, and SCF. Opening the new two-way gateway should also create opportunities for other solution providers to take advantage of this technology and build more applications that leverage blockchain across the Tradeshift platform. Tradeshift also has an extensive partner network that includes major banks (like HSBC, Santander, and Citi) that are now using Tradeshift as its cloud solution for SCF and payments. These are positive steps for a company making real strides into the Supply Chain Financing and payments space.
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