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Blockchain can make invoice financing safer for MSMEs
March 29, 2023
Blockchain has the potential to improve security, enhance efficiency and reduce costs when it comes to receivable financing. This could particularly be good news for MSMEs that face significant hurdles in accessing credit. Let us see how.
As per RBI, online fraud cases amounted ₹128 crore to businesses in the year 2022. An increasing trend that is seen is smaller businesses are frequently becoming the target of cyberattacks as they cannot afford comprehensive security solutions. Here blockchain can help these businesses as it involves decentralised transaction records, so the data cannot be manipulated for any fraud.
Blockchain consists of numerous blocks of data, which in turn are stored across nodes. Data that is stored across a network of nodes is more difficult to hack into than data that is stored at a central location.
Even if fraudsters hack into some nodes and alter the data, it would give rise to suspicion as the data would differ from other copies across the network. The ability to automatically identify suspect data helps to streamline the receivables transactions. There is no need to manually track or navigate paper trails and emails.
Another area where it can help is in reducing paper work. Each transaction in trade finance requires authentication and that can give rise to a lot of paperwork and delays. However, blockchain uses digital tokens. Each participant in the supply chain is issued a token to authenticate the movement of goods.
Important Links:
- Post Graduate Diploma in Management (PGDM): https://tscfm.org/courses/post-graduation-diploma-in-management/