Abstract
Invoice factoring is a very useful tool for developing businesses that face liquidity problems. The main property that a factoring system needs to fulfill is to prevent an invoice from being factored twice. In order to prevent double factoring, many factoring ecosystems use one or several centralized entities to register factoring agreements. However, this puts a lot of power in the hands of these centralized entities and makes it difficult for users to dispute situations in which factoring data is unavailable, wrongly recorded or manipulated by negligence or on purpose. In this article, we propose an architecture for invoice factoring registration based on a public blockchain. To solve the aforementioned drawbacks, we replace the trusted third parties for factoring registration with a smart contract. Using a smart contract, we record digital evidence of the terms and conditions of factoring agreements in explicit detail, allowing auditability and dispute resolution. Relevant information is highly available on the blockchain while its privacy is protected. The registration is optimal, since it needs only one blockchain transaction and one key-value storage per invoice factoring.
Highlights
In business-to-business financial relationships, it is a common practice to pay for some services or products with some delay, for example, several months later
THE FACTORING PROCESS A factoring relationship involves three parties [10]: (i) a buyer, who is a person or a commercial enterprise to whom the services are supplied on credit, (ii) a seller, who is a commercial enterprise which supplies the services on credit and avails the factoring arrangements, and (iii) a factor, which is a financial institution that benefits from the discount on invoice factoring
We describe the concept of Blockchain Certificate, and we provide some preliminary discussions related to our smart contract
Summary
In business-to-business financial relationships, it is a common practice to pay for some services or products with some delay, for example, several months later. If there are several possible centralized registries for invoice factoring, which is quite common, another problem arises In this case, the factoring information is scattered and it is the responsibility of the buyer, the less involved entity in the factoring process, to check the records of all possible trusted third parties and make sure that the payment is made to the correct party. The factoring information is scattered and it is the responsibility of the buyer, the less involved entity in the factoring process, to check the records of all possible trusted third parties and make sure that the payment is made to the correct party In this context, a public blockchain seems a natural tool to solve these issues, because it can keep the record of factoring agreements and prevent double factoring [5].
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