7 B2B DeFi Use Cases for Finance Departments
For years, decentralized finance (DeFi) has applied mainly to B2C transactions. Investors or individuals would load up their crypto wallets with Bitcoin or Ethereum or Doge tokens and hope for a rapid and dramatic increase in asset value. And while decentralized ledgers have been used since the 1980s for some B2B projects, DeFi didn't take off until years later.
Consider this: the DeFi market in 2019 was about $1 billion. By 2021, this value soared to $80 billion. More and more organizations recognize the value of B2B DeFi, especially when it comes to business-to-business transactions and payments.
But many finance professionals may still be skeptical. Some common questions include:
- Q: Will we need to learn new software or how to code? (A: Not necessarily.)
- Q: Will we need to accept cryptocurrencies? (A: Not at all.)
- Q: Is it really better than regular automation tools? (A: For finance? Absolutely.)
DeFi users leverage a number of benefits, such as increased transparency, 100% visibility, faster transactions, pristine records, automated bookkeeping, and expense functionality.
To better understand how DeFi works, we need to look into what kind of situations and workflows this technology applies to.
7 B2B DeFi use cases for finance departments
DeFi solutions were built for B2B payments. The infrastructure is ideal for finance departments, which suffer from an ever-growing workload of processing and compliance regulations. The increased transparency and security methods lend themselves to meeting regulatory criteria worldwide. And as icing on the cake, decentralized applications generally provide a better customer and employee experience.
Let's take a sneak peek at the common B2B DeFi use cases for finance departments.
1. Digital notarization
Even an automated billing platform can have a problem decoding potential duplicate invoices and payments. Verifying transactions manually, however, is incredibly labor-intensive. Not only do financial professionals have to thumb through old documents, but a notary will still need to give a stamp that the transaction is authentic.
DeFi platforms offer a simple solution.
Our DeFi developers at Paystand have developed an application that can automatically notarize and certify payments. We call it Assurety.
When a B2B transaction is digitally notarized, a certified receipt is sent to both parties to confirm the payment. This essentially eliminates one route to fraud while also providing a clear auditable trail. And unlike the traditional method, this form of notarization can happen in minutes rather than hours.
2. Streamlined bookkeeping
The earliest use of a blockchain platform and DeFi protocol is in bookkeeping. Blockchain technology is meant to be a transparent and unchangeable record of transactions, whether for crypto or fiat transactions.
Today, a DeFi app for B2B payments can record Bitcoin or Ethereum transactions and dollars, pounds, euros, and other traditional currencies. Since records can't be changed after they have been committed, the blockchain ledger provides an inscrutable audit trial.
3. Know-Your-Customer (KYC) workflows
Another critical aspect of financial services is fraud prevention. While digital notarization and bookkeeping records can help mitigate potential fraud risks, it's crucial to have updated and verifiable customer documentation, too. As regulation tightens in the United States and the EU, among other regions, the DeFi space provides an excellent tool for KYC procedures and workflow.
A blockchain platform can store all client information securely and verify each transaction its records. The only way to change a record is to upload a new one.
4. Fast Payments
One of the benefits of both decentralized finance and the crypto ecosystem is that payments require fewer intermediaries to verify information accurately. As a result, the cost of transferring electronic B2B payments is significantly lower. At the same time, the speed is relatively the same no matter where the payments are coming from, which makes a DeFi platform for payments ideal for global transactions.
But how fast is it, really? Well, we can’t speak for every platform. But Paystand’s use of DeFi cuts DSO by 60%.
5. Ultra-secure virtual credit cards
Virtual credit cards are nothing new, but they are far less susceptible to fraud and easier to monitor. However, DeFi solutions for credit cards take it a step further. Not only can you assign spend limits and automate expense reporting, but some DeFi solutions (like Paystand) offer significant rewards. For example, it's possible to earn rewards in crypto, which are often used to hedge inflation.
6. Automated workflows
Through the use of smart contracts, DeFi applications can automatically verify and commit to transactions. They also push information through the workflow, generate receipts, and provide enhanced analytics.
The best part is that decentralized finance platforms like Paystand also integrate into legacy ERPs, so your team doesn't have to learn a whole new program.
7. Information and asset tokenization
Through a DeFi blockchain platform, assets can be recorded as a token. This allows for partial payments, makes it easier to raise funds, and helps with setting budgets.
But other information can also be tokenized - such as credit card numbers, names, and other sensitive data. For example, we can replace personal information with a Fund-On-File token. You can securely authorize payments and charge client cards without directly touching sensitive data.
DeFi is more than just a buzzword. It’s a game-changer.
A technology primed for finance departments, DeFi platforms can quickly and easily transform your AR workflow. Read more about how DeFi and blockchain technology can revolutionize your payments processes here.