Our InstaSupply Insights are all about our exploration into what's possible, what's evolving and how technology is empowering people to work smarter, achieve better results and create more value.In this video our co-founders, Tim and Lee, chat Blockchain and why it will kill the invoice and allow businesses to create their own currencies...
Lee: All right. So, Blockchain, a really hot topic right now. You can't go anywhere without hearing about Blockchain. Public ledgers, digital ledgers, Bitcoin currencies. Tell me, what is using blockchain in InstaSupply? What is the problem that we’re solving by using Blockchain?
Tim: So, Blockchain technology for us, will make a significant difference to how a buyer and a supplier do business. Essentially, it removes both institutions’ banks from that transaction.
Lee: So, it’s removing costs.
Tim: It’s removing costs, a significant amount of costs actually, yes. It’s also removing a significant amount of process, I would have thought. But I think the big thing is it’s going to essentially kill the invoice.
There will be no need for an invoice anymore because, if you represent a PO as a block on the Blockchain, then that is an immutable thing. It means it’s unchangeable. And that means that when a supplier approves a purchase order, they are committed to it being that cost and only that cost. They could never issue an invoice that would be more or less money than the purchase order.
Essentially, when the purchase order completes and the payment is made to the supplier, it will be the money that’s in that purchase order.
Lee: So, what does that mean to an accounts payable department?
Tim: It means an accounts payable department will be reduced significantly. If you look at something like Ethereum, which is a modern extension of Bitcoin and is very open source Blockchain, they provide a technology called smart contracts, which enables you to incorporate a little bit of logic or code within the blocks, so that you can specify when the funds should be released.
What that means is, essentially, when you issue the purchase order, you don’t have to release the funds to the supplier until you're happy you’ve received the service or the products that you are buying. So, as soon as you do those, you can use the code that’s in the smart contract in those funds and release it to the supplier, which means that there is no payment process. That’s all part of the receiving process.
Lee: So, where do you think organisations today are at in implementing Blockchain-type technology, like what you just spoke about?
Tim: It’s not something I've seen in the purchase order chain. It’s certainly not something we’ve seen in purchase ledger up until this point. I think it has a real capacity for use. I'm sure that the industry will be thinking about it in quite significant terms, but I think Ethereum technology at this point is perfectly implementable to do what we’re talking about here.
Lee: So, why are you seeing companies converge around Ethereum?
Tim: I think Ethereum is interesting to a lot of businesses because it’s a fast follower of Bitcoin. You know, Bitcoin was the first implementation of this sort of technology and they originally went down a kind of fixed route about how they should implement that idea.
Ethereum has taken that idea and grown on it. They’ve added a whole bunch of extra functionality to it, but more importantly, they’ve made the actual Blockchain technology open source, which means that a lot of businesses can take the ideas behind Blockchain and implement blocks in any way that they see fit, which means it opens up the ability for you to create your own currencies of sorts.
Lee: So, recently, you’ve seen companies like Microsoft, Barclays, Shell starting to apply this type of technology to their business. Because that’s happening, I think more and more attention is being drawn to even midmarket businesses of how do they leverage this type of technology to basically make themselves more productive and more profitable.
Tim: Yes. See, I think it’s interesting. I think a lot of these more modern businesses who are willing to take it up are likely to be the kind of fast followers, so to speak, of that technology. But those more old-school businesses, the 20, 30-year-old businesses out there that are a little bit more reticent, a little bit more risk averse, they're unlikely to go down that route unless they see some of these larger enterprises, like Barclays and Shell and the big companies going down that route.
Lee: I think you're also going to see a unique trend where businesses that are doing global supply chain. So, you talked about dealing with suppliers and perhaps developing countries or are you dealing with suppliers that are based in countries that have currencies that are fluctuating quite rapidly or dealing with suppliers for verification and trust? How do they leverage technology to facilitate those transactions on a global level?
Tim: Yes, I think, and it’s absolutely a good point because ultimately, cryptocurrencies replace that need for changing funds. You no longer need to worry about conversion rates in your funds from Euros to British pounds, to US dollars because, ultimately, the cryptocurrency becomes that funding.
And, yes, I think you're right. In terms of the trust part, you're no longer involving lots of organisations outside of the direct transaction. You're no longer involving all those financial organisations. It’s direct between customer and supplier and that’s significant.