According to Tencent, the financing cost for suppliers will be 33% lower than the average factoring cost. The size of the programme has not been disclosed yet.
Suppliers in need of working capital upload trade documents onto WeChain. Once the documents are verified by WeChain and acknowledged by the core buyers, transaction banks will acquire the receivables from the suppliers, similar to a reverse factoring transaction. Bank and securities companies will then package the assets into ABS products and further distribute them to investors.
The factoring + ABS model has now become common among financial institutions and tech companies to improve corporate liquidity. In this type of fintech collaboration, banks normally act as the financial service providers while technology companies provide technological support.
Tencent has been investing in blockchain and its treasury system over the past few years. In August 2018, the first blockchain-based invoice was issued by a Shenzhen-based restaurant. Via WeChat, the restaurant’s customers are able to access a digital invoice and get reimbursed by corporate treasurers. Corporate treasurers and the tax authority in Shenzhen are also able to track the transactions online. The blockchain technology was backed by Tencent and Kingdee.
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