Odyssey 2019 winner ChainMix helps Dutch Chamber of Commerce fight fake invoices with open data
Fake invoices are a worldwide problem. They cost companies, customers and institutions billions every year. The Dutch Chamber of Commerce (KVK), which owns and manages the Dutch Business Register with three million organizations, found a solution to combat this problem at Odyssey Hackathon 2019, together with one of the teams in their Digital Nation’s Infrastructure track.
Update June 23, 2020: note that the event formerly known as Odyssey Hackathon has been moved online and rebranded as Odyssey Momentum. More: https://www.odyssey.org/odyssey-hackathon-becomes-momentum/
The solution of the ChainMix team uses an open blockchain, or IOTA tangle, and artificial intelligence to prevent different kinds of invoice fraud.
For example, think of a so-called man-in-the-middle attack. In this case, a third party sends an invoice seemingly from a legitimate company, but they use a different bank account on the invoice. As most invoices are sent using a PDF attached to an email, the fake invoice comes from an email address which seems legitimate at first sight by using, for example, a very similar name: Chamber of Comerce instead of Chamber of Commerce. Hard to spot at first sight when it drops in your inbox.
This type of fraud is extremely easy to carry out because most invoices are not electronic. Electronic invoices, also called e-invoice or e-factuur, are much less sensitive to fraudulent practices because of secure communication links that are used between applications. Invoices in PDF format are called digital invoices; they are basically the digital version of a paper invoice.
Since the hackathon, the team has continued to work on the solution with KVK and other stakeholders, such as the Dutch Tax Administration (Belastingdienst), with the goal to have a proof of concept (PoC) by the end of the year.
The road to Odyssey Hackathon 2019
“When blockchain came up, we wondered if we could use this technology for the benefit of entrepreneurs. We were looking for use cases where KVK data is used for the benefit of entrepreneurs,” explains Ben Schuttenbeld, Odyssey 2019 challenge lead, Manager Operations InnovationLab at KVK.
The information that ends up in the databases must be true, and that requires trust, but it is difficult to be absolutely certain that the information is true, and that is why institutes, such as KVK, continue to be needed. These institutes then function as so-called ‘oracles’. Technically oracles are the interfaces between the real, analogue human world and the digital world. In other words: they are the eyes and ears, and sometimes noses, that put the information in databases. The institutes are the senses we have to trust, the oracles.
The information from the databases is then recorded with a so-called ‘hash’ on a public blockchain and so anyone can check that the information is true and that it has not been tampered with. This can be true for many stakeholders, from banks to land ownership registries and many more. KVK narrowed the initial question down to build an identity checker to allow entrepreneurs to identify themselves in the digital world. All participating teams were asked to build a system where KVK is the oracle for the digital identity of firms, corporates, institutions and freelancers.
Dummy trade register
In order for the project to succeed, KVK had to build up a lot of different parts beforehand. Think of planning various meetings in the run-up to the hackathon, having a deep dive in advance, or compiling information and datasets that could be used for experiments. Ben says compiling the datasets was the most challenging part, as this required setting many different datasets, like a dummy trade register and dummy datasets for annual accounts from companies.
Finally, the preparations were made for the project follow-up after the hackathon. Ben: “Money needs to be set aside, a project leader needs to be available and in this way, a good follow-up can take place. My colleague Saïd Akdim took responsibility for the team and the project so we could start right away after the hackathon.”
Five reasons KVK participated
“The Dutch Chamber of Commerce had five important reasons to participate in the Odyssey Hackathon,’’ says Ben. “The most important one is getting ideas. We want solutions to a problem. The second is that we want to learn, we want to gather information. How does it work with blockchain and artificial intelligence? The third is that we want to strengthen our own network. Fourthly, we want to promote the ecosystem and innovation.
And last but not least, we want to show our modern image. As an ambitious and modern public service provider, KVK strives for the best service for the very entrepreneurial Netherlands.”
The ChainMix team
“An overwhelming event”, recollects team captain Andre Fialho. “Very well organised. I was struck by all the lights and the entrance to the whole event. A great show and everything, but when the clock starts and you realize there are only 48 hours left, you forget about the world around you. It was my first hackathon and I learned a lot!”
“It’s all about going ‘all in’, having fun and building the bare minimum to get your product out”, Andre continues. “We had a lot of help from the Jedi, and our team consisted of people with many different skills, so we as team members were very complementary to each other. Viorica, for example, she’s a lawyer and part-time working on the concept of blockchain and smart contracts. But she also deals a lot with company contracts.”
“We addressed a problem that is very tangible, so it was easily grasped by everyone. I think this was the result of a good technical team, but also the people working on marketing having a good understanding. This led to a very good outcome: we won and we have a follow-up to build a proof of concept.”
Lessons learnt
Andre says a diverse team is very important. It helps to get different ideas on the table, complementing each others background, but this can also be a challenge as not everyone speaks the same language, which may lead to too much discussion. And too much discussion just costs too much time. That’s the downside of a diverse team, but it helped ChainMix win.
Asking for feedback is very important to improve your ideas. In case of the hackathon, Andre says the Jedi were an important source of knowledge. “Really, use the expertise from the Jedi! And don’t close yourself off from the world.”
Ignite sessions
At the end of the hackathon during the Ignite sessions on Monday, the Tax Administration met with the ChainMix team. They were immediately interested in the project because the Tax Administration curates a lot of (income) data and is regularly approached for access to this data. “The ideas of ChainMix seemed a good fit for new use cases to make interaction possible between private and public services,’’ says Chantal van der Wijst, Strategic Advisor for Innovation to the Tax Administration.
Development
The team first made a mutual validation report to know what kind of fraud is common between businesses. After the validation report, the team described an approach to the problem, but without naming a specific protocol or solution. From this description the team came up with a real application how to thwart fraudulent invoices.
The third step was a legal report with questions like what the role of the Chamber of Commerce is, how that role functions within the scope, if there are any issues with the GDPR (General Data Protection Regulation).
Follow-up
Said: “InnovationLab KVK wants to investigate whether the registration of public keys in the Trade Register is legally possible and which guarantees should be incorporated into the registration process. We also want to investigate whether there is a need in the market for such registration.”
Ben explains that the follow-up to the challenge requires a project leader, time within the own organisation to work with the team that has won, and, of course, money. ChainMix signed a deal with KVK after the hackathon to build a proof-of-concept.
The Tax Administration has also been involved in the follow-up. Various departments explored the problem of fake invoices and looked at whether the proposal of ChainMix could be a good solution for this. Now the Administration waits for the results of the follow-up and will help again to take the initiative a step further to implementation. Eventually, they expect to hook up suitable parties and hope to be able to start a joint pilot.
KVK has been involved in the hackathons from the beginning and Ben notes that it came a long way from the first hackathon. Especially the commitment of other policymakers is very important, such as the Ministry of the Interior, the Belastingdienst, Ministry of Security and Justice, the Land Registry and many others, is seen by Ben as crucial for the project.
Andre mentions he’s also very glad about the outcome and the follow-up where they signed a deal with KVK. The ChainMix team is looking forward to showing its first proof-of-concept by the end of 2019.
About Odyssey
Odyssey connects governmental, corporate, and nonprofit partners with innovative ideas to collaboratively address complex 21st-century challenges. We mobilize a global ecosystem of more than 6,000 members, among whom developers, creatives, startups, corporates, investors, governmental bodies, legal experts, regulators, scientists, and other key stakeholders. The past three physical editions of the event known as “Odyssey Hackathon” have drawn thousands of participants from around the world to Groningen, the Netherlands. The next edition, rebranded as Odyssey Momentum, explores the internet’s potential to unlock new levels of online collaboration and next-gen event experiences.
