J.P. Morgan's auto financing arm has announced the creation of a blockchain-based automobile inventory system to digitize floor plan financing.
The system is also aimed at bringing efficiency to the commercial lending process. The project came out of the company’s patent-pending distributed ledger-based floorplanning methods. Floor plan financing is commonly used by car dealerships to purchase inventory, and the unethical practice of misreporting sales to the bank has been a major challenge plaguing the automotive supply chain.
Currently, an auditor has to physically travel through a dealer’s lot to gather information on vehicles and make sure that the inventory being financed is actually there. It is a capital-intensive and time-consuming business, and Chase’s new DLT application tries to offer a more efficient alternative.
The proposed DLT also aims to prevent double flooring, which is when a dealership pledges one vehicle as collateral for floor plan contracts to more than one bank. JPMorgan has completed a pilot project using the patent-pending technology and is confident about the overall prospect of the project, according to J.P. Morgan representatives.
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