When people ask what blockchain might impact or change within vendor financing and the wider financial industry, people wonder if I’m joking when I say everything.

Essentially, blockchain has the potential to impact any industry that stores and transfers data. Today, because every industry, organization, and employee rely on data at an exponentially increasing rate, blockchain does have the potential to impact absolutely everything we do.

The possibilities are only limited by our own creativity, and while Bitcoin has earned the most headlines in recent blockchain conversations, the technology is still in its infancy. The platform hosts a wealth of possible efficiency and security-driving applications within industries ranging from logistics and shipping to our very own financial world.

At Cisco Capital, we are beyond excited by the innovation that blockchain technology promises to the financial industry. Despite the ability to remove countless intermediaries and secure data in an unprecedented way, blockchain still holds a wealth of untapped potential. Additionally, for finance professionals, blockchain offers an opportunity to reimagine how we manage data, collaborate with others, and ultimately shape our profession as we head into the upcoming decades.

On a fundamental level, blockchain can accelerate financial transactions while increasing security exponentially. In order to explain this acceleration and security, we’ll do our best to describe how blockchain works, provide some thoughts about how this technology specifically applies to vendor financing in terms of transactions like equipment rental, and end with use cases illustrating the future potential of this industry-shaking platform.

What is Blockchain and how does it work?

Blockchain is shorthand for a whole suite of distributed ledger technologies that can be programmed to record and track anything of value, making it a cornerstone technology when combined with emerging artificial intelligence and IoT technologies. We can read and transmit data with the internet of things, or make data-based decisions with machine learning, but blockchain provides a crucial step in ultimately trusting that data due to its decentralized architecture.

On a very high level, blockchain is a consensus driven distributed, shared ledger with privacy. More simply put, blockchain provides a distributed, encrypted method of transferring and tracking value as an ongoing list of transactions or records. Each individual transaction is a block in the chain, and the peer-to-peer network-based links that chain cryptographically.

This peer-to-peer, decentralized nature makes it virtually impossible to alter the data on any single block without doing so on all previous blocks before it. And furthermore, thousands of computers around the world contain replicated versions of these records.  If you’re interested in diving a bit deeper into the basic structure of blockchain, watch Don Tapscott’s June 2016 Ted Talk on Blockchain basics.

In addition to providing a secure way to track and trust our data, blockchain helps accelerate data management through digitization and the reduction or elimination of process intermediaries, who historically provide the same secure means for data transfer. This automation and removal of intermediaries can unlock unprecedented potential with new platforms, processes, and financial roles, ultimately driving a vast shift for vendor financing and the financial industry adoption of blockchain.

How will blockchain impact vendor financing?

When applied to vendor financing, blockchain has the potential to digitize documentation, capital market access, security, UCC1 filings, asset management, and more while removing intermediaries that clog up transactions, therefore accelerating our work and reducing stakeholders to the essentials: the borrower and the investor.

While digitization provides a provocative look into our future  financial processes, dis-intermediation, or blockchain’s ability to remove intermediaries, highlights what might be blockchain’s most disruptive and promising feature for vendor financing. Dis-intermediation can accelerate transactions by removing the various allotment desks, escrow banks, and issuers that work in between the borrower and investor within a standard bond process, for example.

Dis-intermediation has the potential to re-shape any financial process featuring intermediaries along with the entire leasing process from start to finish. For example, blockchain can simplify collections of AR, distribution and supply chain financing, and compliance.

Specifically, with distribution financing, we typically work with banks to track secured assets and keep pricing in the system. Because blockchain provides a way to track and assign values of secured assets and accurately monitor pricing, blockchain potentially removes the need to work with a bank as an arranger and servicer, providing the stakeholders with fewer reconciliation points and potential security threats and ultimately a faster, less costly end-to-end process.

For vendor financing and the wider financial industry, in addition to process acceleration, blockchain can help secure transactions while simultaneously increase our trust in data and enhance the customer experience.

Ready for a few more examples of blockchain in finance and beyond?

Blockchain is exciting, there’s no doubt about it. A few recent examples of blockchain in action have recently piqued our curiosity within the financial industry and beyond.

Auto-manufacturer, Daimler-Benz issued their first blockchain-backed bond last year, totaling a €100m issued on a private version of the Ethereum blockchain. When asked about the bond, representatives explained that because Daimler issues 50-70 bonds annually, blockchain could allow a greater number of transactions which would then be smaller in size.

Outside of finance, blockchain can even impact marriage licenses. Last year, Nevada’s Washoe county, home to Reno, Nevada, saw a surge in blockchain-backed marriage licenses and birth certificates. Apparently, a traditional marriage certificate can take up to 10 business days to process and the blockchain-backed certificates take less than 24 hours.

If that wasn’t enough to spark your imagination, Forbes compiled a list of start-ups and established companies currently using blockchain tech in industries ranging from healthcare and finance to government and charity.

Blockchain technology promises to strike a significant shift in the way we work in the financial industry and beyond. Over the course of the next decade we’ll witness countless examples of blockchain in action across the world and with any luck, blockchain really will change everything in what we hope will be a positive, equitable way for everyone involved.


Interested in learning more about the exciting potential of blockchain in the financial world? Listen to Wayne’s recent podcast on the topic with the Alta Group here.

For more about Cisco Capital, please visit us www.cisco.com/go/financing.



Wayne Super

Vice President, Global Partner Organization and Capital Markets

Cisco Capital