Cai Yige: Tencent breaks through the blockchain by setting a benchmark in supply chain finance

Image: Cai Yige, General Manager of Tencent Blockchain Business

As BAT has rushed into the blockchain, Tencent is the most aggressive one.

Earlier data showed that supply chain finance, ABS and virtual digital assets will be Tencent's main promotion targets in 2018. This time at the "Internet +" Digital Economy Summit, Tencent's blockchain statement perfectly confirmed one of these points. At the group interview site of the Smart Finance Forum, Cai Yige, general manager of Tencent's blockchain business, said directly in response to reporters' questions:

We will first set a benchmark in the field of supply chain finance, add blockchain, and then go deeper into the scenarios.

There is a reason why Tencent covets the supply chain finance market.

According to Leifeng.com AI Financial Review, my country's small and micro enterprises have grown at an average annual rate of 8% in the past few years, but the credit coverage rate is not satisfactory. Data shows that in 2016, the volume of accounts receivable of core enterprises was about 12 trillion yuan, and factoring financing digested 500 billion yuan, and the undeveloped space in this market exceeded 95%. Small and micro enterprises in the supply chain not only face the pain points of lack of own funds and narrow financing channels; core enterprises also have the problems of high payment period pressure and difficult management of supplier chains. Combining these two points, financial institutions lack the grip to serve customers and are insufficient to support the development of the real economy.

Cai Yige said that the biggest problem for small and micro enterprises is "difficult and expensive to obtain financing" is credit. Without sufficient credit, banks and other financial institutions dare not lend easily. This is also an important reason why Tencent has access to blockchain technology. "Blockchain is inherently decentralized and can solve the credit problem very well." Cai Yige said, "We hope to use Tencent's blockchain technology to build a new supply chain financial open platform, thereby empowering small and micro enterprises and creating inclusive finance."

According to Cai Yige, Tencent's blockchain + supply chain finance solution adopts the model of "using accounts receivable from core enterprises as the underlying assets, realizing the circulation of debt certificates through blockchain, ensuring that they cannot be tampered with, cannot be refinanced, and can be traced."

How to understand it? Cai Yige took the accounts receivable of a certain car company as an example. For example, a certain car company has to pay 10 million yuan to its first-tier tire supplier according to the trade contract, but it tells the latter that it wants to pay back the 10 million yuan in half a year. Then, after the tire supplier receives the 10 million yuan in receivables, it can use the Tencent blockchain platform to let the car company confirm the rights online for it. After the confirmation, the Tencent platform can convert the 10 million yuan in accounts receivable into a digital debt certificate of the same amount. Every level of supplier in the supply chain, as long as they have participated in the splitting of the 10 million yuan, can get the corresponding digital certificate based on the core enterprise's debt. The most critical thing is that after the certificate is in hand, each level of supplier can find various types of financial institutions anytime and anywhere to achieve financing.

For small and micro enterprises, this method can solve the problem of financing difficulties. At the same time, it can also greatly reduce financing costs. Cai Yige gave a data: the cost interest paid by small and micro enterprises for financing alone will be around 10-20%, while the cost of financing obtained through this supply chain will be less than 10%.

To help small and micro enterprises get loans within seconds, Tencent has also added a "bridge fund" structure to its supply chain finance open platform. When a supplier needs financing, it first uses this "bridge fund" to connect with the supplier, and then connects the fund with the bank, thereby improving their capital liquidity.

Through this process, not only can core enterprises improve their cash flow and balance sheets and increase supply chain efficiency, but financial institutions can also gain new leverage, expand their customer base, such as small and micro enterprises in the supply chain, and further increase their profits. Cai Yige said, "Under this model, Tencent will not participate in the pricing of debt assets, but will open the rights to the funding party." The entire process is completely realized online.

According to the Tencent Smart Finance White Paper, the number of registered companies on Tencent's blockchain BaaS open platform has increased from 0 to more than 800 since 2017. The total number of merchants connected to the financial cloud has increased by 197% to 944.

This growth trend may be related to Tencent's design model for the BaaS platform. Cai Yige told Leifeng.com AI Financial Review that the platform does not charge partners at present, and is more focused on making products first and developing more application scenarios. The selection of B-side partners is also "not limited to type and scale, from large to small."

At the same time, Tencent has also opened up all three capabilities of the BaaS platform to its partners, including:

• AMS (Asset Registration and Audit Gateway): involves asset organization and entry, risk control audit, product design, etc. of core enterprises and first-tier suppliers.

• Accounts receivable blockchain debt ledger; such as debt transactions, blockchain revenue accounts receivable, etc.

• ABS cloud platform: such as project management, asset import, product life cycle management, etc. Cai Yige revealed that the platform is currently in communication with the Shenzhen Stock Exchange.

Compared with other giants who use blockchain to deploy supply chain finance, Tencent's differentiated strategy is mainly reflected in its positioning. "Tencent does not participate in supply chain finance, but fully opens up to partners in the role of information service provider."

Tencent Blockchain also has the underlying support of Tencent Financial Cloud. Leifeng.com (official account: Leifeng.com) AI Financial Review learned that in November 2017, Tencent Cloud TBaaS platform was released. The main difference between this platform and Tencent Blockchain BaaS platform is that the former provides open source and self-developed solutions including Trust SQL for users to choose, while the latter is a deeply customizable and expandable platform built with the self-developed blockchain product Trust SQL as the core bottom layer.

Cai Yige revealed that in the future, Tencent Blockchain BaaS open platform will also introduce identity authentication, big data risk control, CA, third-party payment and other capabilities to help companies establish enterprise-level blockchain applications.

In the eyes of some people, does Tencent's choice to develop applications based on alliance chains mean that alliance chains have more prospects? In this regard, Cai Yige bluntly said, "Alliance chains are more suitable for the B-side." He believes that collaboration between institutions often has problems with credit costs and cooperation efficiency, and alliance chains can just solve these clear pain points. However, he also said:

This does not mean that public chains have no value. It is just that public chains need to solve the problem of economic incentives, and generally they need to issue coins. Once there are coins, there will be speculation bubbles, which are more dangerous. We hope to move forward with the pace of supervision and create value through alliance chains first.

In his opinion, BAT or traditional institutions are often attacked for entering the blockchain because they are centralized, while blockchain is decentralized. Some blockchain startups even put forward the view that "BAT cannot do blockchain." Cai Yige responded by saying, "Decentralization is too idealistic. Going the alliance chain route and relying on Tencent's platform capabilities accumulated over the years will not be worse than your brand new platform." His focus seems to have returned to the dispute between public chains and alliance chains.

At this summit, Tencent Blockchain also brought everyone a surprise - it will release a blockchain game. This is mainly due to Tencent's consideration of the C-end scenario.

Cai Yige revealed that this blockchain game was jointly created by Tencent Blockchain and Tencent Game Team. "Games are what Tencent is good at. We can overlay blockchain technology around games in To C scenarios and make it more in-depth."

From Honor of Kings in 2017 to PlayerUnknown's Battlegrounds in 2018, Tencent does have a strong voice in the gaming field. However, when asked by reporters, "How does Tencent plan to combine blockchain with games?", Cai Yige kept it a secret. He said that the details will be announced to the public on April 23.

In the medical scenario, Tencent blockchain has made some progress. According to Tencent Chairman and CEO Ma Huateng at the summit, Tencent is currently working with Liuzhou, Guangxi to try to use Tencent blockchain technology to ensure that prescriptions are not tampered with based on WeChat registration and payment functions, thereby realizing the "out-of-hospital prescription circulation" service of "prescribing in the hospital and purchasing medicine outside the hospital".

In the logistics scenario, Tencent is also working with member companies to build an alliance system based on blockchain technology. This system aims to address the pain points of mutual distrust and changes in inventory caused by layers of compensation packages in the entire logistics field.

Will Tencent Blockchain have any relevant layout in the field of smart retail? Cai Yige said frankly, "Smart retail is a big concept, and there is no clear landing point yet. However, the possibility of it in the future is not ruled out."

It is not difficult to see that, with the support of the underlying technology, Tencent Blockchain pays more attention to starting from a single clear scenario and realizing the aggregation of blockchain ecological scenarios from point to surface. This coincides with Tencent's strategy in cloud services, big data, AI and other aspects.

“I think our approach should be to drive technology development through scenarios,” said Cai Yige. “It is more natural to verify blockchain technology through scenarios and in turn promote the improvement of blockchain technology.”

That being said, scenarios can drive technology development, provided that technology creates scenarios. The birth of blockchain not only brings great imagination to existing applications, but also gives rise to countless new scenarios. It is for this reason that the giants are willing to fight closely in order to seize the throne of the most favorable scenario.