For the First Time, Alternative Funders will be Able to De-risk Invoice and Receivable Finance Transactions – Reducing Compliance Costs and Fraud
Singapore – Incomlend has adopted Invoice Check – a blockchain application developed by Trade Finance Market (TFM) to quickly and easily determine if an invoice on our platform is potentially being double financed on the outside.
Invoice fraud is a major source of risk in receivables finance and is a central point of Incomlend’s risk mitigation matrix. Invoice fraud comes in many shapes and colours but is generally divided into three categories:
1. Unilateral fraud. The invoice is faked unilaterally by the Seller. It often happens when the funds provider does not disclose to the Seller’s Buyer that invoice ownership has changed hands. In that case, the funds provider cannot verify the invoice’s authenticity directly with the buyer.
Incomlend mitigation: we combat this risk by systematically disclosing the transaction to the buyer and requesting the supplier to provide a full set of third-party documents proving the reality of the transaction.
2. Collusion. The invoice is faked by the Seller in collusion with the buyer. When the funds provider asks the buyer to confirm the invoice, the buyer will confirm the invoice even if it is fake since the buyer is colluding with the Seller.
Incomlend mitigation: we reduce this risk by requesting the supplier to provide a full set of third-party documents proving the reality of the transaction and checking both supplier and buyer on potential collusion red flags (sales concentration, common key people, etc.).
3. Double financing. The same invoice is financed multiple times by the Seller with different fund providers or financiers.
Incomlend mitigation: we solve these risk issues by redirecting all buyer’s payments to our accounts and via the “Invoice Check” deployed in the Incomlend system.
Invoice Check solution by Trade Finance Market is a major new development to reinforce Incomlend’s risk mitigation measures on double financing using blockchain technology.
The International Chamber of Commerce found almost 20 percent of banks reported an increase in fraud allegations over the past year – representing a major threat for businesses and organisations around the globe. There may be several funders who all think they own the invoice or receivable when a default occurs. This problem is magnified in cross border transactions, especially when only paper invoices are used and in markets where there is no central registry to register a charge.
Invoice Check encrypts transaction data using blockchain technology whilst also providing information on whether an invoice is potentially fraudulent or being double financed. A key difference with Invoice Check is that it does not rely on a central registry – using instead the power of decentralised ledger technology. Data is protected from potential competitors and is tamper-resistant once on the blockchain. Invoice Check works alongside existing technologies and can be easily deployed via an API, keeping costs down and increasing accessibility.
Director and Founding Partner of Incomlend, Dimitri Kouchnirenko, sees this as an important development: “Partnering with TFM on invoice fraud risk mitigation through practical blockchain technology is a major milestone for Incomlend. We are proud to be at the forefront of innovation with TFM’s Invoice Check deployment into our systems, reinforcing even further our cross-border risk management framework. We invite all the fintech invoice trading platforms and other financiers to join the TFM initiative to build the world’s first global immutable registrar of receivables finance transactions based on decentralised ledger technology, contributing to making international trade finance a safer place.”
“We are extremely pleased to be working with Incomlend – demonstrating how fintech is taking the lead in the pioneering, practical use of distributed ledger technology,” said TFM Executive Director Raj Uttamchandani. “The inability to validate invoices is an obstacle for SMEs in obtaining finance and slows growth. Invoice Check fills this gap and utilises blockchain in a way that has never been done before – with the end goal of providing funders with security and SMEs with liquidity.”
Kelvin Tan, Co-founder and Chief Investment Officer of GTR Ventures, which has invested in both TFM and Incomlend, adds: “We are very happy to see both our portfolio companies in the fintech lending space, working together to enhance their risk management processes. Multiple invoicing is a global, industry-level risk that afflicts alternative fintech lenders and factors and banks, insurers, and credit funds. Such collaboration fulfils our vision to go beyond mere venture capital investing and, as a venture builder, take proactive steps to solve structural pain points in the lending sector. Leveraging Singapore as a starting point as a trusted digital data hub, we welcome all lenders, banks, non-banks, and fintech to partner us in our vision to build an alliance to reduce risks in the lending sector and mitigate fraud.”