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Singapore is emerging to be one of the front-runners when it comes to innovation and adoption of new technologies in the financial sector. The country has proven itself again by developing the first blockchain technology based application for the banking and financial sector.
Still in the proof of concept stage, the new blockchain based application was developed together by the Infocomm Development Authority of Singapore, DBS Bank and Standard Chartered Bank. The proof of concept device will be used by the authorities to make the process of trade invoice financing more secure and easier, both for the companies and lending banks.
Invoice financing is commonly used by companies in many countries across the world to improve the cash flow. Companies borrow from banks and financial institutions after furnishing pending customer invoices as collateral. The new Proof of Concept allows banks to digitize the invoices and upload them on to a decentralized ledger as digital asset. This blockchain based decentralized ledger will act as a common data repository that can be accessed by all participating banks to check the status of applications/invoices for financing etc.
The use of blockchain like distributed ledger helps the companies/banks to maintain confidentiality and conduct due diligence at the same time. These uploaded invoices are verified by banks to ensure that the same invoice is not financed multiple times. In addition to financial risks, the application also cuts down the time required to process the payments .
The Proof of Concept distributed ledger technology developed by Infocomm Development Authority of Singapore in association with well-known banks is the first application to be developed for enhancing the security of trade finance invoicing. Even though the product is still in the concept stage and the scope of its usage is currently limited, it is definitely a major step for Singapore as it strives to be labelled as Smart Nation.
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