AuraBlocks is using blockchain to help its customer Biz2Credit verify the identity of borrowers. Biz2Credit provides loans to small- and medium-sized businesses.
“They [Biz2Credit] thought there was an opportunity to help the borrowers lower their rates and get access to more money by using the Blockchain Cloud Platform,” said AuraBlocks CEO Richard Brownstein. “But they didn’t know how to put it all together. We designed technology on the Oracle Blockchain.”
The specific use case for Biz2Credit is a merchant cash advance for businesses. Biz2Credit advances funds to merchants based on credit card receipts. With the AuraBlock technology, a merchant’s loan application information is verified within the blockchain ledger. The next time the merchant wants to apply for a loan, it can use the same information without having to again go through the verification process.
Apparently, establishing borrower identity is a time-consuming endeavor in merchant-to-cash scenarios. “It can help many businesses talk to each other who would normally not want to talk to each other. But they’re willing if they know the information is safe, private, and encrypted,” said Brownstein.
Once a client’s identity has been verified, the client can give access to that information to other lenders. “Once you’ve established identity on the blockchain, it can never be changed; it’s been time-stamped,” said Brownstein.
AuraBlocks CTO Kiran Murty said there are a number of parties coming together to conduct a merchant cash advance. There’s the lender, a borrower, and the credit card company. There might also be lawyers or auditors involved. “All the information flowing between these persons is flowing in an age-old process,” said Murty. “But it is an involved, highly inefficient workflow. That is the scenario we are trying to solve.”
It took AuraBlocks a few months to create the blockchain software for Biz2Credit. But it only took about a week to set it up on Oracle’s Blockchain Cloud. Biz2Credit has run it as a proof of concept and plans to begin beta testing.
Blockchain for Financial Transactions
“The analysis that was completed by our team reveals that implementing the AuraBlocks technology developed on the Oracle Blockchain Cloud Service could reduce our operational costs by 25 percent on a $1 billion book of business,” according to Venkatesh Bala, chief risk officer for Biz2Credit, in a statement.
The complexity of financial transactions have been cited by others as an ideal use case for blockchain. Earlier this year, Raphael Davison, global director of blockchain at Hewlett Packard Enterprise (HPE), said a typical credit card transaction today requires 16 steps, involves seven parties, and takes seven days. With blockchain the same transaction can be reduced to one hour.
Murty said with AuraBlocks’ software, “If the lender marks a merchant cash advance, that change gets recorded and relayed to all participating parties on the network right then and there, unlike today, where the information is disjointed. It’s like a state machine, for lack of better words. It’s a simple network where transacting business parties change state.”