Context and Objectives

Blockchain technology is one of the most exciting technology nowadays, with the potential to change the shape of the economy in the future.

Its promises are :

  • Permanent, immutable, decentralised shared ledger of transactions
  • Instant information sharing among multiple stakeholders around the world
  • Open access to the information

In the years following the release of Bitcoin (the first Blockchain), multiple other Blockchains were created, sometimes simple copies of Bitcoin and others adding new concepts or functionalities. For example Namecoin links website Domain Name ending in .bit with their actual location on the Internet, Zcash allows for users to exchange coins totally anonymously and Ethereum adds the Smart-Contracts functionality. This functionality allows the Ethereum Blockchain to execute programs, called Smart-Contracts, in a decentralised, trustable, and autonomous way.
 
However, since the Blockchain is a new infrastructure enabling disruptive new usage, it is difficult to predict its impact on Euler Hermes and the Trade Credit industry. For this reason, EHDA is exploring how Trade Credit Insurance (TCI) would look like on a Blockchain-based platform. Before proposing Trade Credit Insurance, there need to be transactions to insure, consequently our first experiment will focus on leveraging the properties of the Blockchain to create a new type of invoices called “Smart-Invoices”.

What we did

The present experiment enables companies to upload their invoices into the Ethereum “Smart-Contract” blockchain. Once uploaded, the smart contract can access the payment due date, the amount, and the contractor. With this information, the Smart-Contract can identify the network of companies trading with a given client. Then, whenever a company is not paid by a client at the due date, the smart contract can automatically decide, according to the rules implemented at its inception, whether to send or not to send an alert to other suppliers of the same client, thereby preventing payment defaults and trading with the insolvent buyer. Similarly, when the company starts paying its invoices again the smart-contract would inform all the companies that the client is now safe to trade with.

Invoices generate events. Those events are processed by a smart-contract that decides whether to send alerts to companies about a particular buyer.

EHDA developed this solution as an experimentation of the Blockchain technology. On a more technical side, Solidity was used to code the smart contracts, the front end was developed using the web3.js and some parts of the Mist framework.

You can find more details and access the source code on :

 

Conclusion

This is the first demonstration that it is feasible to have a working invoice hosted as a Smart-Contract on a Blockchain. This experiment also shows the added value of Blockchain technologies for both Euler Hermes and its clients. If a solution like that was deployed at a large scale, Euler Hermes clients would receive up-to-date, reliable information regarding the financial health of their partners, allowing them to make better business decisions.

This solution represents a huge opportunity for companies as it would allow them to receive real-time feedback about their network of partners, thereby enabling them to take safer and sounder decisions. Similarly, it would allow companies to recover the trust of their business partners faster after a difficult period.

The exploration phase is not over yet! The next step is to test what a full-fledge Trade Credit Insurance contract would look like using Blockchain, and how it could be combined with the Smart-Invoice design. Further investigation still needs to be carried out regarding the best technology to use to provide information on Invoice value, maturity, reliability, without giving away valuable business details.


Lessons learned

This experiment demonstrated that:

  • Having an automated and standardized way of storing and interacting with Invoices across the industry would enable companies to be more efficient and take safer decision
  • Despite companies receiving real-time update on the health status of their network of partners, there is still a need for a macroscopic view of the whole sector/industry as well as providing information on new prospects. Therefore, Euler Hermes business analysis and insights will still be critical.
  • Blockchain technology makes data more secure by sharing it instantaneously with everyone on the network. However, this may appear problematic for companies that wish to protect confidential business information. Some Blockchain technologies tackle this issue by using a “hybrid” approach : the Blockchain stores only the proof that the information exists but uses more traditional data sharing technologies to communicate and protect the actual information only to those actors who need it.
  • The use of this technology can help companies share business insight without giving away valuable business information
  • When this experimentation started Euler Hermes was the first big player to try to put invoices on the Blockchain, now there are more experimentation but none of them are market ready yet.
  • But we are confident that our technical approach is going into the right solution and are excited to share more of our next experimentations soon.

 

Are you interested in learning more about the project, or testing it?