Tradeshift and Monerium: breaking new ground in programmable digital B2B payments

October 1, 2019 James Hayward

At Tradeshift, we’re all about challenging the status quo and bringing forth the future of B2B finance. Last week we helped the industry take a big step forward by working with Monerium to settle the world’s first invoice on the blockchain using smart contracts and licensed digital cash. 

Using Tradeshift’s platform and smart contracts on the Ethereum blockchain, Icelandic retailer, Nordic Store, purchased goods from IKEA Iceland and settled an e-invoice with Monerium’s programmable digital cash.

To find out more, we spoke with Mads Stolberg-Larsen, a blockchain specialist within Tradeshift Frontiers. He provides the inside track on this groundbreaking transaction and details the impact it could have on the future of B2B finance.

How did you start working with Monerium, Nordic Store and IKEA Iceland? 

We’ve experimented with smart contracts for some time within Tradeshift Frontiers. And earlier this year we settled the world’s first “smart invoice” on a public blockchain. But what we’ve always wanted to do is settle a smart invoice using ‘real money’— by which I mean money recognized by regulators.

I didn’t expect that we'd have the opportunity to do this for a few years, while we waited for regulators to approve an e-money provider for blockchains. So when we heard Monerium were licensed by the Icelandic government to issue Icelandic króna on the blockchain we jumped at the chance to partner with them. 

Monerium’s CEO connected us with the owners of Nordic Store and the CFO of IKEA Iceland. Both of whom agreed to participate in the transaction and see the power of the technology first hand. 

Tell us a bit more about the transaction itself. 

The transaction was with Nordic Store as the buyer and IKEA Iceland as the seller. Nordic Store ordered furniture, while IKEA Iceland issued them an e-invoice through the Tradeshift network. Nordic Store immediately approved the invoice on Tradeshift and then on Ethereum. On the due date, which we set to be the day after the invoice was sent, the transaction was automatically settled through a smart contract. 

It was an exceptionally collaborative few days for everyone involved. We proved that government-regulated, programmable e-money is ready for mainstream markets. 

What business challenges does this technology solve? 

It can lower the cost of cross-border B2B transactions. A recent paper from Bain shows that cross-border payments are five times more expensive for businesses than domestic payments. And that’s just the fees. When also considering the time and energy companies spend on cross-border administrative workflows the cost becomes even greater. This is a big reason why small businesses struggle to expand and grow overseas.

We can keep transaction costs low because the blockchain doesn’t recognize sovereign borders. In the blockchain world, there are no domestic or international transactions. They’re all just transactions. So what that means is that companies using the blockchain for payment pay a standard price per transaction. The B2C space has already caught onto this and we’re seeing blockchain and various cryptocurrencies used for remittances. 

There are also huge efficiency gains when you tightly combine e-invoicing and digital money on a blockchain. For one, it’s fully digitized so it requires next to no human interaction, mitigating the risk of errors. It also accelerates transactions, so payments settle in minutes rather than days. 

But it’s not just about solving challenges. Solutions like this also create new business opportunities. For example, we all know about the trade finance gap and the challenges legacy solutions face to meet the demand. We think this solution may hold the answer. The ability to tokenize invoices creates the opportunity to extend cheap, short-term cash deeper into the supply chain.

What comes next? 

We’re building on this momentum by working with Monerium to conduct a cross-border transaction in either pound sterling or euro. We’re also looking at testing the technology with more complex transactions that replicate modern supply chains.

It’s early days, but it’s exciting to see what many once considered impossible become reality.

How can people get involved? 

We’d love more companies to take part in these tests and get a first-hand glimpse into the future of B2B finance. If you’re interested, you can contact us here at Frontiers to find out more. 

Next month we will explain more about what programmable supply chain payments mean. Subscribe to the Tradeshift Blog to be the first to find out. 

About the Author

James Hayward

James is Tradeshift's Editorial Manager and a Content Writer obsessed with storytelling and providing finance professionals with insights and advice on how to take their finance function to the next level.

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