Zhejiang ShiningHub Co., Ltd.
Zhejiang ShiningHub Co., Ltd.

《Trade Finance》 Magazine | TradeAider: The Secret of Credit System Construction in Supply Chain Finance

The Secret of Credit System Construction in Supply Chain Finance

Author | Chen Meiqi, reporter of Trade Finance magazine

Source | Trade Finance Magazine October 2019

The Secret of Credit System Construction in Supply Chain Finance

If a person can not be a "craftsman" in the industry, it is difficult to see the truth behind the industry. Supply chain finance seems simple, and many enterprises flock to it, but the internal wind control logic lacks a link, which is difficult to do well.

Chen Liang, founder and CEO of TradeAider

In 2019, the case of the supply chain financial explosion is still ringing in our ears. Noah Wealth lost 3.4 billion yuan in Chengxing International, Minxing Pharmaceutical defrauded 2.268 billion yuan by forging accounts receivable materials, and ST Huaye and Hengyun Pharmaceutical also lost 10.189 billion yuan in accounts receivable.

Supply chain finance seems simple, many enterprises flock to it, but the internal wind control logic lacks a link, which is difficult to do well. As the saying goes, no diamond, no porcelain work. Chen Liang has been working in the field of international trade and manufacturing for 27 years, running several foreign trade companies and production factories, and has a deep feeling about the pain points and problems caused by the imperfect integrity system in the global trade supply chain, such as substandard product quality, counterfeit and inferior products, infringement of intellectual property rights, difficult financing and expensive financing.

The Pain Point Lies in the Imperfect Trade Integrity System.

At present, most supply chain financial platforms mainly increase the credit of small and medium-sized enterprises through the guarantee of core enterprises and the determination of accounts receivable, so as to improve the confidence of banks in small and medium-sized enterprises.

Although the development of supply chain finance in recent years has promoted the financing of small and micro enterprises, it still cannot fundamentally solve the financing difficulties and expensive problems for the vast number of small and micro enterprises because it cannot fundamentally penetrate the asymmetry of trade information.

In addition, based on the fact that core enterprises are usually unwilling to provide guarantees or confirm accounts receivable for small and micro enterprises, the pulling effect on small and micro enterprises is relatively limited.

Chen Liang pointed out that supply chain finance is different from the traditional credit financing mode, providing financing services for single or multiple transactions, with the characteristics of "closed, self-liquidating", theoretically can perfectly reduce credit risk and reduce losses, but there are still five major pain points in the process of business development.

  • First, it fails to identify false trade in advance. The real trade background is the basis for the development of the supply chain finance business, once the trade background is distorted, the source of debt repayment of the financing business cannot be implemented.

  • Second, the quality of the goods is not up to standard and the value assessment is not accurate. The quality problem of the goods may cause the buyer to refuse to pay; an Inaccurate valuation of the price of the goods will result in the value being less than the financing exposure.

  • Third, the supervision of logistics and warehousing is not in place. Lenders usually lack the ability to manage logistics and warehousing links and will outsource supervision to logistics/warehousing enterprises that do not have advanced management means, which will easily lead to risks.

  • Fourth, there is no closed-loop control over the repayment path. In the process of fund recovery, there is a risk that the loan enterprise misappropriates funds or does not return the funds to the designated account.

  • Fifth, it is difficult to supervise the flow of loan funds. Lenders usually judge the use of loans by examining documents, and can not accurately control the authenticity of the use of loan funds.

It is not difficult to see that the imperfect trade integrity system is the main reason for the "thunderstorm" of supply chain finance. The construction of a trade integrity system can effectively evaluate and control the authenticity of trade and the quality of goods, which is strong support for the healthy development of supply chain finance.

The So-called "Big Data" Maybe "Wrong Data".

In Chen Liang's view, at present, most of China's supply chain finance relies on so-called "big data" for risk management, and few supply chain financial platforms and financial institutions will adopt high-frequency on-site verification methods to assess the authenticity of trade in-depth and professionally.

On the one hand, big data has certain falsity and lag. On the other hand, from the perspective of the supply chain financial thunderstorm, the so-called "big data" maybe "wrong data".

The key is to obtain the data of trade authenticity assessment from the source of all walks of life with low cost and high frequency and to ensure that the evidence chain of trade authenticity assessment has strong credibility through advanced anti-counterfeiting traceability technology.

And that's exactly what TradeAider can do. The official website shows that TradeAider is the world's first third-party Internet + trade integrity system construction platform, which is equivalent to the "DIDI Transportation" in the field of global trade integrity system construction. It uses the concept of shared economy, based on blockchains, big data, artificial intelligence, and Internet of Things technology. One end is connected with 2.5 million QC (quality control personnel) in the national circulation field, and the other end is connected with domestic and foreign e-commerce platforms, domestic and foreign purchasers and brands, production factories and trade intermediaries, foreign comprehensive service platforms, etc., which is equivalent to providing basic "water" and "electricity" in the construction of supply chain financial integrity system.

Of course, this "water" and "electricity" are particularly important for the healthy development of supply chain finance.

Up to now, TradeAider has integrated 70000 quality control audit experts from 26 major industries, covering more than 2000 cities across the country, and the number is still increasing. It provides quality control, anti-counterfeiting traceability and financing credit enhancement services covering 26 categories of products in the whole industry Including clothing and textiles, light industrial handicrafts, mechanical and electrical products, minerals and chemicals, food and livestock, medical and health products, high-tech products, etc.

It is worth mentioning that "advanced technology + quality control of grounding gas" is the wind control mode of TradeAider. Among them, advanced technology refers to the use of high-tech anti-counterfeiting traceability technology, block chain technology and notarization technology; The quality control of grounding gas refers to doing the hard and dirty work of quality control in a down-to-earth manner to obtain the authenticity evaluation data of trade at the source.

Of course, as long as the information is more transparent and the banks are more trusted, the financing of small and micro enterprises will be easier.

It is Better to Teach Enterprises "Fishing" Than to Teach Them "Fish".

It is understood that the strategic cooperation between TradeAider and China Anti-Infringement and Counterfeiting Innovation Strategic Alliance and the Notary Public Office recognized by the Ministry of Justice will retain the authoritative evidence chain for the whole process of on-site audit and evaluation of trade authenticity and quality of goods, which has legal effect.

TradeAider can solve the problem of information asymmetry in trade from the source, which can not only promote the transaction between buyers and sellers but also fundamentally improve the ability of supply chain financial platforms and financial institutions to control trade risks, thus fundamentally helping to solve the financing problems of small and medium-sized enterprises.

  • For lending enterprises, it can ensure the authenticity of trade, ensure the consistency of single goods, reduce the risk of lenders, and greatly deter financing enterprises with malicious fraudulent ideas. According to different product categories, strictly control the quality and control the risk of buyer's refusal to pay; It can accurately assess the price of goods and cover the financing exposure. In the management and control of logistics/warehousing links, select experts of different categories to reach the site to carry out supervision, warehouse inventory, and other work, and track the flow of goods.

  • For loan enterprises, it effectively improves the trust and willingness of lenders to loan enterprises. It not only cures the symptoms but also cures the root causes. As Chen Liang said, "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime".

Only by helping loan enterprises to improve their own quality, product quality, and market competitiveness, and making them a member of high-quality enterprises, can they truly enhance the integrity and competitiveness of Chinese enterprises from the root.

Chen Liang told reporters that in the next stage, TradeAider will carry out in-depth cooperation with financial institutions in all regions of the country to carry out a nationwide financial wind control enabling layout. It has gradually set up branches in major countries and regions around the world, integrated local auditors into the TradeAider platform, and extended the antenna of trade authenticity assessment to foreign buyers. Aggregate trade whole process wind control closed-loop. We will build a platform for building a transnational integrity system and improve China's integrity system in global trade.

In the future, we will continue to innovate in technology research and development, personnel training, organizational management, and product optimization. Chen Liang will also go hand in hand with the goal of "going out" to build a transnational shared QC platform to enhance China's dominance and voice in the construction of the global trade integrity system.

Finally, Chen Liang said: "The development of supply chain finance will continue to maintain a high growth trend, and the future prospects are very broad. A number of unicorns with high-tech means in the field of supply chain finance subdivision and a number of cross-domain comprehensive supply chain financial giants may emerge."