Blockchain, the technology that powers the cryptocurrency universe, is also a game changer for supply chain finance, increasing trust between counterparties, accelerating transactions, and enabling automated contracts.

First, blockchain can help to establish trust between two counterparties. Traditionally reliant on letters of credit from banks to guarantee payments, blockchain verification can allow parties to transact with a greater degree of security. For instance, Chinese online lending platform Dianrong, along with FnConn (a subsidiary Foxconn Technology Group), recently announced the launch of Chained Finance, a blockchain platform aiming to solve funding pains of Chinese SMEs by eliminating the trust issues faced by counterparties.

Second, another positive impact of blockchain is its speed in reporting and validating transactions. Supply chain financing normally needs to go through a tedious approval process involving manual paperwork. Blockchain platforms for supply chain financing can allow parties to review and approve transactions in real-time speeding up the movement of goods along the supply chain. In India, IBM has worked together with local lender Mahindra in facilitating a process where buyers and suppliers can have up-to-date information about their transactions.

Finally, blockchain can enable ‘smart’ or automated contracts between parties when there is supply chain financing agreement. For example, if a smart contract is written between a buyer and a supplier to say that once goods have been cleared by customs, 20% of the funds will be released to the supplier, a smart contract would automatically disburse payment once confirmation is entered into a distributed ledger.