Today Japan’s SBI Holdings announced it’s investing in Singapore fintech RootAnt Global, taking a 4.85% stake. The startup has a supply chain finance solution that uses R3’s Corda enterprise blockchain.
It’s good timing given the ramp-up in supply chain activity as a result of the COVID lull.
A joint venture is planned between RootAnt and SBI subsidiary BYFIN, which focuses on digital transformation for banks and businesses. The joint offering, SBI BANCO, targets regions including Japan, Hong Kong and Vietnam.
RootAnt’s BANCO Platform provides a multi-tier supply chain solution that relies on a large buyer’s creditworthiness. This means that its direct supplier can take advantage of invoice financing, and so can its supplier’s supplier and so on down the supply chain.
How it works
Consider a supplier that provides wheels, including tires, to an auto manufacturer. When the wheels are delivered to the car company, the auto firm issues a digital payment obligation (DPO) to pay on a specific date. The supplier can wait for that date or use the blockchain platform to get bank financing for the DPO. Because the DPO is from a big company, and the obligation is logged on a blockchain, a bank would offer a lower interest rate to the supplier because the risk is lower.
Hence, the bank pays the supplier and takes over the DPO. In turn, the bank receives payment from the auto company when it’s due.
But the wheel supplier has another option. It could use the DPO to pay its supplier. Hopefully, it’s getting paid more than the supplier. So it can split the DPO, and get financing from the bank on just part of it. It could transfer the DPO’s balance onto its tire supplier as a commitment to pay for the tires. It’s the same DPO, so the tire supplier has a large car firm’s payment obligation, which it can easily finance. And the tire supplier could likewise choose to split the DPO and transfer part to its rubber supplier.
RootAnt launched its BANCO solution last October and, around the same time, closed its $1.46 million seed round of funding.
Meanwhile, SBI is involved in many blockchain and digital assets deals. Most of its activity is in the digital assets sector, including security tokens. It also has the Money Tap digital payments venture. It was started by SBI, uses Ripple technology, with many regional banks as participants. It could potentially use relationships to promote SBI BANCO. SBI is also R3’s largest outside shareholder and an investor in Ripple and has joint ventures with both.
