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Yes Bank Develops Blockchain to Digitize Vendor Finance in India

Last Updated March 4, 2021 4:53 PM
Samburaj Das
Last Updated March 4, 2021 4:53 PM

Yes Bank, a prominent private sector bank in India has announced the implementation of a multi-node blockchain to digitize and automate vendor financing solutions for a regional client.

Vendor financing is essentially the lending of money by a company to one of its customers, so the latter can purchase products from the company, driving sales for the former.

To develop the solution, Yes Bank sourced technology from the Linux Foundation-led open-source blockchain project, Hyperledger. The blockchain solution made use of smart contracts developed by Fintech startup Catenia Technologies to deliver a vendor financing solution for major Indian electrical equipment manufacturer Bajaj Electricals.

Bajaj’s business interactions that include discounts and disbursal of funds to its vendors will be digitized over the blockchain, allowing for faster, more efficient record keeping and increased transparency. Yes Bank’s anchor client (Bajaj Electricals), will see automatic debits from its account at the bank, as a part of the automated smart-contract enabled blockchain transaction.

“The entire process cycle for bull discounting reduces from four days (owing to manual intervention and transit) to almost real-time,” a press release from Yes Bank read.

Rana Kapoor, CEO at Yes Bank stated:

I strongly believe that we are only at the tip of the iceberg,and envision that Blockchain coupled with IBM’s Cognitive solution on Cloud platformwill make a significant impact in the global Transaction Banking space by ensuring that the Financial Supply Chain is more robust, secure, seamlessly connected and provides a great customer experience.

The blockchain implementation was heavily facilitated by technology partner IBM. Hosting the blockchain over its “Hybrid Cloud” platform, Yes Bank also leveraged IBM’s “Watson Conversation” a cloud-based cognitive service to further enhance the user experience of participants (bank, the vendor and borrowers or purchasers) in the blockchain.

Bajaj managing director Shekhar Bajaj sees blockchain as the solution to digitize supply chain financing. He stated:

This solution enables us to do timely processing of the vendor payment through vendor financing from the bank without physical documents and manual intervention. It also enables us and our vendor to track the status of the transaction on a real-time basis.

The blockchain implementation in Indian business finance comes during a time when other similarly notable efforts start to take shape in the country. IBM has also partnered major Indian conglomerate Mahindra to bring supply chain financial solutions in the country for small and medium-sized enterprises.

Tech giant Microsoft launched its Azure Blockchain as a Service toolkit to Indian customers in December 2016, soon after the announcement of a partnership with consulting giant KPMG to push blockchain adoption among clients in India.

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