Traditional industries are facing the problem of payment delays. The most painful thing for the manufacturing industry is “payment delays”. If the payment from the customer (buyer) does not come in, the seller may even face the risk of bankruptcy.
Isle Finance from Taiwan is targeting the pain points of fund turnover and financing in traditional manufacturing industries and supply chains. It has created an on-chain agreement that allows buyers to borrow from a fund pool and make advance payments to suppliers, giving both parties more flexibility in fund turnover.
In theory, there are three categories of beneficiaries from Isle Finance’s service: buyers have more abundant funds, sellers can receive payments on time, and the “liquidity providers” who provide funds can also earn interest income.
What difficulties do suppliers and buyers actually encounter?
In the operation of traditional manufacturing, contract manufacturing, or factories, after the seller provides products or services to the buyer, the buyer still needs to process and produce them. The payment will only be made to the seller after the products are sold.
Taking the shoe manufacturing industry as an example, suppose a Taiwanese supplier, the seller, produces shoelaces for Nike. After providing the shoelaces to Nike, Nike needs to turn the shoelaces and other accessories into complete shoes and deliver them to different sales channels for final sales and settlement. After Nike sells the shoes and obtains profits, the payment will be made to the shoelace seller.
Lin Bocheng, CEO of Isle Finance, said, “This process may take weeks or even months. Sellers usually hope to receive payments as soon as possible in order to accelerate business expansion. However, buyers expect to extend the payment period to ensure that funds can be paid at the most favorable time. Therefore, the time difference in payments becomes a challenge for both buyers and sellers in the supply chain.”
The above is just a more reasonable case. In a buyer-dominant market, unequal contracts may be signed, and the performance period may last for a whole year.
In addition, Yang Chunlan, Chief Strategy Officer of Isle Finance, added that small and medium-sized sellers often need fund turnover due to buyer payment delays, and bank financing is one way. However, when banks handle these financing requests, they usually need to conduct strict due diligence procedures, including evaluating the credit risk of the company, which not only takes time but also limits the financing capacity of many small and medium-sized suppliers.
(Left to right) Guo Zhuanyi, COO of Isle Finance, Lin Bocheng, CEO of Isle Finance, Yang Chunlan, Chief Strategy Officer of Isle Finance.
Isle Finance’s solution for supply chain financing
Isle Finance is a payment credit protocol on the PayFi track. As a buyer (in the previous example, Nike), if you want to advance payment to the seller (shoelace manufacturer), you can borrow from the Isle Finance fund pool and repay later. In this way, the buyer will directly receive the payment.
Lin Bocheng described Isle Finance as an “online POS machine”. Once approved, the protocol will give the buyer an online credit payment limit. After the seller’s invoice is uploaded to the chain, the buyer can use a private key to sign on the chain (similar to the credit card payment process), and Isle Finance will pay stable coins from the buyer’s wallet to the seller’s wallet. The buyer must repay the “card fee” before the due date.
As for the liquidity providers of the fund pool, they can be individuals or institutions and earn returns from the interest paid by the buyer.
Isle Finance, as a PayFi network, emphasizes achieving “real-time transactions”, obtaining rapid fund flow, and breaking away from the traditional financial system to solve the financial problems of real assets with blockchain technology. Yang Chunlan explained that for cross-border payments and corporate loans, PayFi not only accelerates the payment process but also reduces transaction costs.
Overcoming market education and compliance challenges
Guo Zhuanyi, COO of Isle Finance, admitted that it is not easy to introduce Isle Finance or stable coins to traditional enterprises, as many companies still have many doubts and misunderstandings about cryptocurrencies, and their understanding of cryptocurrencies is still limited to negative news reports.
To overcome these challenges, Isle Finance is actively cooperating with compliant cryptocurrency exchanges to help companies convert stable coins into legal tender to meet the funding needs of traditional enterprises. In addition, the team continues to promote market education to enable more companies to understand how to use blockchain technology to improve the efficiency of fund flow in the supply chain.
Isle Finance will officially launch its mainnet in the fourth quarter of this year. Guo Zhuanyi said that Isle Finance has already started cooperation negotiations with several Taiwanese and international companies and plans to expand its service scope. “Because Isle Finance uses a blockchain payment network, it can provide businesses with low-cost and convenient credit payment services. It only needs to connect to the network without a bank account, and it has the opportunity to cover global suppliers.” Guo Zhuanyi said.
Isle Finance’s service has a good intention and truly demonstrates the characteristics of blockchain technology. However, when it is implemented in the real world, there are many problems that technology alone may not be able to solve. It remains to be seen how many people Isle Finance can attract and how many manufacturers can experience the beauty of the blockchain world.