Factoring and Blockchain: A Case Study In Wave Catching

CapGemini predicts the mainstream adoption of blockchain technology and smart contracts in the factoring industry by late this year — here’s how Hiveterminal are catching the wave.

Photo by guille pozzi on Unsplash

In business, timing is everything. There are plenty of examples of great companies who simply emerged at the wrong time. Take Six Degrees or AskJeeves. Both were ahead of the curve, but people weren’t ready for what they had to offer. They had the right product, but turned up at the wrong time, and this proved to be their undoing. A slow slide into obscurity means we rarely hear about these failures. Again, timing is everything.

But it’s no use being on time if you’re not in the right place. Google defines being in the right place using the acronym EAT, which stands for expertise, authoritativeness and trustworthiness. As you can imagine, being seen in this way means you will always be at an advantage. But this doesn’t just happen overnight. It takes years to build, is very hard work and there are absolutely no guarantees.

However, this feat looks like it has been achieved by Hiveterminal. As long ago as 2016, they saw the factoring and blockchain wave forming on the horizon and have been working hard to build a sustainable business ever since. And with CapGemini confirming that the mainstream adoption of blockchain and smart contracts in factoring will happen this year, it looks like their timing was right.

This was how Hiveterminal approached their task and what still remains to be done to ride this wave to the shore.

The wave catching checklist

  • Identify the multi-trillion invoice finance and factoring industries as ripe for blockchain optimization in the next three to four years. ✔
  • Confirm that these industries thrive, even during recessions and economic downturns. ✔
  • Enjoy the support extended by Deloitte, PwC, KPMG and E&Y toward blockchain’s applicability for audit. ✔
  • Implement a P2P concept, democratizing the industry. ✔
  • Develop and submit a patent pending risk algorithm with the USPTO. ✔
  • Enter the biggest market, but select an entry point you and your team know and understand well. ✔
  • Demonstrate the scalability of your platform to encourage the VC investment required to take you to the next stage. ✔
  • Make all platform fees payable in your utility token. ✔
  • Withstand the pressure to waste money on overpriced exchange listings. ✔
  • Formulate tokenomics that ensure strong platform demand for the token. Amend as necessary if your approach is not working. ✔
  • Link the strength of the platform to the strength of the utility token. ✔
  • Make your tokens available for sale on your platform at a fixed price of twice the market rate, updated daily. Call it the “over-the-counter” (OTC) solution. ✔
  • To service this need, buy tokens from exchanges to fill up your OTC wallet, setting a pre-determined and non-public threshold for when that occurs. It’s a revenue stream. ✔
  • Let institutional investors who may not want to use crypto exchanges know they can buy your token with fiat, but at this higher price, removing barriers to entry. ✔
  • And let the crypto community know they can still buy your token for a lower rate on exchanges, driving demand there. ✔
  • Do not sell any tokens held by the platform until the platform is working as envisioned at the start of your project. ✔
  • Not even if the tokens reach 30 times their original value. ✔
  • Instead focus your marketing on your core business to build your company’s worth. Avoid distractions and unnecessary spending. ✔
  • Sponsor a sports team in your test market to raise brand awareness. ✔
  • Establish yourself as pioneers in applying blockchain technology to factoring. ✔
  • Provide public data on platform performance to the community. They want you to succeed, so will start projects like this.
  • Forge partnerships with financial data companies, accountancy firms, and national chambers of commerce in your target markets. ✔
  • Develop an ERP strategy, and find a partner to develop a plug-in for an ERP provider, such as Microsoft Dynamics. ✔
  • Nurture and maintain a passionate, loyal and knowledgeable community, who can also make returns through P2P factoring by using the platform you create. ✔
  • Provide real and tangible benefits to the business model, such as cutting costs, improving efficiency and helping to eliminate fraud. ✔
  • Bring near instant liquidity to business worldwide. ✔
  • Give platform users a way to make passive income returns of approx. 12–14% p.a. ✔
  • Focus on ensuring that platform performance is trending upwards. ✔
  • Help invoice buyers dealing with late payments. ✔
  • Establish yourself as the best performing blockchain-based factoring platform in the world. ✔
  • Search for equity investment, focusing on investors who are are aligned with your strategy, will retain the core team, and have a strong portfolio in the hundreds of millions of dollars. ✔
  • Ensure that your investors also hold your platform’s tokens to support their commitment to it. ✔
  • Make the difficult decisions required to grow. ✔
  • Secure VC investment to scale up and expand into the rest of your target market after 18 months of operation in your test market. ✔
  • Fulfill CapGemini’s forecast that the mainstream adoption of blockchain in the factoring industry will occur by late 2020. ✔

Still to come

Although the vast majority of work has been done, the most difficult part now awaits. That wave has to be ridden and expansion into a new market is always difficult. Once market penetration has reached an acceptable level, the focus should then be listing the token at a global exchange which has a good reputation, a focus on compliance, and has significant and real 24 hour trading volumes.

It is only right that this happens once the business is operating as it should be, but it is vital to allow ICO contributors a safe, secure and high volume exchange to buy and sell their tokens. There is a lack of volume at HitBTC, Lykke, Livecoin and Idex, all of which are unpopular places to buy and sell cryptocurrencies.

As the lip of the factoring and blockchain wave starts to break, we now wait to see what the rest of the year brings. Will CapGemini’s forecast for this year come to pass? Was Hiveterminal too early or perhaps too late? Or were they, as I suspect, right on time?

Time and tide wait for no man, so if you have any suggestions about other blockchain projects that have caught a similar industry wave, please let me know in the comments. Time is always of the essence. Thank you for reading!

Factoring and Blockchain: A Case Study In Wave Catching was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.