I was recently on a panel session at the RFIx Receivables Finance International Convention in London. We were discussing the future of receivable finance and, inevitably, conversation turned to the formation of various BlockChain consortia and the wider
atmosphere of collaboration. A question from the audience challenging the reality of collaboration – is it really happening or is just something to say to be fashionable? – this got me thinking…
For any kind of collaboration, amongst direct or indirect competitors, it is always going to be difficult. It brings to mind the perilous mating practices of certain venomous insects, often leaving the male of the species as lunch for the female! In business
collaboration, there is often a courtship and a period of ceding information that an organisation may consider to having a corporate advantage. A step-by-step process ensues where parties get comfortable that this sacrifice of important, commercial information
is worth it in the grander scheme of achieving something even more beneficial.
I was speaking with an analyst at Gartner recently about BlockChain and Distributed Ledger Technology (DLTs) in relation to the formation of the main consortia Marco Polo, we.trade. Voltron and Batvia. He had an interesting perspective that what was happening
was as much driven by the large corporates as driven by the banks and technology companies. Why should a corporate invest in integration with one bank, effectively tying themselves in and making it hard to switch or diversify banking relationships? Far better
to connect to an eco-system with a range of banks at the corporate’s disposal. No matter the “glue”, be it BlockChain, DLTs, regulation, shared risk data, the important thing is that there is a mandate for collaboration that parties have a vested interest
to be involved with in order so as not to miss out or be seen to be missing out. I am sure there are many fringe members of these consortia that are hedging bets and are waiting to see what takes hold.
But are these consortia, by definition, limiting? What are the driving forces? Who holds the balance of power? Are they only orientated around the major banks and corporates? Is the collaboration wide enough?
Common eco-systems are a good thing for business; take the Internet as an example that has revolutionised commerce and changed the face of the high-street forever. However, the Internet is based upon
open standards, which has allowed innovation to take place. What if there were two internets or more? Where would we be today?
Email uses common standards (SMTP/IMAP/POP3) so that I can email anyone, without knowing what email technology my correspondent is using – it just works (too well when it comes to an ever-increasing volume of spam email!).
If we consider eInvoicing by comparison has been around for decades in one form or another, but has never had the impact of Email. Why? eInvoicing, rather than physically posting paper invoices, is obviously more cost effective, faster and potentially more
secure and resilient to fraud. The reason why it has not gained traction globally is that there is no universally adopted standard. Where it has succeeded is in places where governments have either facilitated or, better still, mandated a standard for eInvoicing.
Latin America leads the world, but driven by the governments desire to get control of commercial transactions to more easily manage VAT recovery. Finland is another leader with the “Finvoice” standard, even though there are proprietary eInvoicing networks.
Therefore, in most parts of the world, the eInvoicing industry has become fragmented and now faces challenges of interoperability between different proprietary networks. A global and open standard akin to email could have made a major difference.
BlockChain/Distributed Ledger technology, conceptually, has the ability to replace eInvoicing (and paper invoicing) as the Supplier and Buyer (and other parties) simply go to the same point of truth to access the transaction. The current technology relies
upon permissioned (think private/centrally controlled) BlockChain/DLTs, with the consequence that the consortia are potentially creating digital silos of commercial activity. Similar to the story of eInvoicing, will this lead to issues of interoperability
and stagnation as businesses wait to see which of the consortia gains dominance (think back to the video market Betamax vs VHS battle of the 70s)?
Public BlockChains that are decentralised may be the way forward. They offer an open eco-system where no single entity has control. Bitcoin has enjoyed good and bad press. However, we constantly read about performance implications and is the world really
ready for all commerce to be transacted in an uncontrolled way (think back to our Latin American governments where control was the name of the game)?
Back to the theme of collaboration. Whatever the underlying technology, the sentiments and motivations, the innovation and creativity and the significant amounts of money being invested, the consortiums are still private member clubs. There is an obvious
feeling of competition between them which may be a good thing, but ultimately will this be divisive and stifle innovation and “open thinking”.
I feel there is a an opportunity here for some true collaboration to digitalise commerce (domestic and cross-border) for the mutual benefit of businesses, banks and authorities, but I believe this needs far wider, self-sacrificing collaboration than we see
today. I’m certainly watching with interest as this story unfolds.