Blockchain and Factoring: How Hiveterminal is Optimizing an Industry
CapGemini Consulting predicts the mainstream adoption of blockchain and smart contracts in the factoring industry as soon as late-2020 - Hiveterminal leads the charge.
After spending the last 18 months testing their concept in Slovenia (an EU-27 country), Hiveterminal has already captured 1.5% of its target market. This success prompted a recent buyout of the platform by an unnamed Swiss VC in early 2020, providing the funding the platform needs to begin EU expansion in the next two months. Why? Two words. Blockchain and factoring.
But despite these huge advances, Hiveterminal is relatively unknown in the crypto community. This is because they did not spend big on glamorous exchange listings. Instead they did what they promised and built a client base of small businesses to prove their concept and its scalability.
So there’s a lack of information out there on what Hiveterminal is, the problem it solves, and how it uses blockchain technology. We want to put that right. It’s important that this information is out there for people to read and understand if they want. The contents of this article are purely for informational and educational purposes. It is not intended as financial advice.
Optimizing the factoring industry with Hiveterminal
So, let’s get started with what Hiveterminal actually is. But to understand that, we first need to take a look at the industry it’s based on. That industry is called factoring. It’s not very sexy or glamorous, but factoring is a 3 trillion dollar global market. So, to put that in some sort of context, factoring in the EU represents 11% of its total GDP. It helps keep the financial world on its feet and is a popular solution for businesses to get funding. Especially during economic downturns and financial crises.
Like what we are experiencing right now. So let’s give an especially relevant example at this time in our lives.
Say a small business owner needs funds to grow and develop, even survive. Friends and family can’t help. So he goes to the bank, but his loan application is rejected. However, there is another option. And that’s called factoring.
It works like this. Say a small business owner has done work for a client, and has an invoice due to be paid in 60 days. He can go to a factoring company with that invoice and get cash immediately by accepting maybe 85 to 95% of the invoice amount. When that invoice is due to be paid by his client, instead of paying him, they pay the full invoice amount to the factoring company. So, the small business owner gets the money he needs to grow and develop. And the factoring house makes a nice percentage on the invoice they fund.
Now, the factoring industry has been growing steadily at a rate of around 9% every year, which is great. It’s booming. However, there are some blockchain innovations provided by Hiveterminal that improve the efficiency of this process still further, saving vast amounts of money and time in the process.
How Hiveterminal uses blockchain technology
What Hiveterminal does is simple. They are optimizing the factoring industry using blockchain technology, using their own platform as a case study in how that’s done. So they’re not reinventing the wheel here. They’ve just found several ways to make factoring even better.
These benefits include:
- Democratization of the factoring process
- Fraud prevention
- Data immutability
- Smart contract automation and digitalization
- Decentralized proof of ownership
But let’s go a little deeper into each category to help explain in more detail precisely why factoring will never be the same again.
To begin, Hiveterminal has, in effect, democratized this factoring concept. In other words, they’ve made it a peer to peer system, where they are not involved in the transaction. So instead of a small business having to rely on a select few traditional financial institutions for funding, they can now go to people like you and me to get the liquidity they need.
On the plus side, this means as investors we can get access to some very good passive income returns. We can become our own factoring companies. It’s a new compound interest opportunity, etc. But we also have to take on the risks that these factoring companies deal with. This includes late payment of your invoice by the debtor. In the worst case, the debtor for the invoice you buy can go bust or default, meaning you have to hire a collections agency to get your funds back.
But factoring companies are willing to take this risk because, overall the returns are worth it to them. Even if some of the invoices they buy are not paid. There is no reason that can’t be the same for invoice buyers with a carefully selected invoice portfolio.
The next optimization Hiveterminal brings to factoring by using blockchain is fraud prevention. A problem that often plagues traditional factoring companies, Hiveterminal has found a way to overcome it.
With Hiveterminal, the invoice itself is tokenized inside Hiveterminal’s system. This means that instances of double selling and doubling spending are prevented by default in its blockchain-based structure. This allows Hiveterminal to more easily prevent invoice sellers and buyers from maliciously using the platform.
Data immutability, a key feature of blockchain technology, is also perfect for financial use cases, including factoring and other financial instruments. For Hiveterminal users, there is an immutable time-stamped record of
- all invoices uploaded to the platform,
- debtor confirmation of the invoice’s validity and,
- Every single invoice purchase.
Digitization and automation
Hiveterminal’s solution saves money too. Most traditional factoring companies rely on outdated legacy systems and manual processes. This wastes a lot of money and time, and the customer always pays for that in the end. Hiveterminal on the other hand has digitized and automated many non-digital processes. This allows them to offer their services to invoice sellers completely free of charge.
For example, by combining blockchain technology with real-time financial data, Hiveterminal can calculate the maximum funding amount for an individual invoice on the platform instantly. That’s before the SME even commits to selling the invoice.
Decentralized proof of ownership
Another way Hiveterminal uses blockchain to improve the factoring industry is through its decentralized proof of invoice ownership dApp (or decentralized app). This allows invoice buyers to see proof of all invoice purchases directly on the public Ethereum blockchain. This is better than traditional tech solutions because otherwise the invoice buyer would have to trust the platform to store it all. That’s not the case with Hiveterminal.. Even if Hiveterminal became temporarily inaccessible or disappeared, the invoice buyer would still be able to access all their invoice details on the public Ethereum blockchain.
Blockchain-based systems like Hiveterminal’s have a strong audit trail. This means that regulatory bodies and auditors can easily review all Hiveterminal invoice sales, confirmations and assignments - and all in real time. Plenty of people think that is where the future of audit lies, and we would include ourselves in that group.
That’s a big reason why the Big 4 auditors of KPMG, Pricewaterhousecoopers, Deloitte and Ernst & Young all have blockchain divisions. Their vision is shared by CapGemini Consulting, who predict that the mainstream of blockchain and smart contracts in factoring could be as soon as late-2020. They also stated that the advent of blockchain in factoring services will have a positive impact on the market and help it grow significantly.
But it’s already happening. And if you look around at other blockchain-based liquidity platforms focused on factoring, most have either stalled, lost their way, or are still in testing stages. But that’s not the case with Hiveterminal. They are widely recognized as one of the earliest adopters of blockchain technology in the global factoring industry. You can monitor their performance in real time here at soldonhive.com and we are all rightly proud of what our wonderful team has already achieved.
So, yes. They’re the real deal. As you can see, the blockchain optimizations of the factoring industry that Hiveterminal brings cut costs, increase transparency, eliminate waste, cut fraudulent activity and eventually will enable real-time audit capabilities.
That’s why they have been bought out by a VC managing a billion dollar portfolio, getting the funding they need to expand into Europe. It’s not a pipe dream. This is a real platform, completely under reported and making huge progress almost without being noticed. We really don’t think it will stay that way for long.
So, if you made it this far, thank you for reading the article. We hope you enjoyed it, and feel a little bit more knowledgeable about Hiveterminal and how they use blockchain to optimize the factoring industry. But we’re really only still scratching the surface. Stay tuned for even more tales of abundance, and some video content too, as we continue delving deep into all aspects of Hiveterminal’s future potential.
Published by @soldonhive on Thursday 7th May 2020
*DISCLAIMER: This is not financial or investment advice. The above references an opinion and is for information purposes only. All investments involve a high degree of risk and there is always the possibility of loss. This information is general in nature and has not taken into account your personal financial position or objectives. Before proceeding please refer to a licensed adviser or tax agent and relevant PDS for product details before proceeding.