Fintech 4.0

By Nick Roquefort-Villeneuve, Global Marketing Director — Amalto Technologies

Fintech 1.0 was (and in some cases still is) about financial technology-based applications installed on a desktop or laptop computer. Fintech 2.0 pertains to applications accessible on the cloud. Fintech 3.0 facilitates and automates collaboration among stakeholders. So, what is Fintech 4.0 all about? A few clues… It starts with a “B,” the collective conscience tends to (erroneously) equate the technology to the Bitcoin frenzy, and it is currently the reason why Fortune 50 organizations are engaging in colossal investments and mobilizing most of their respective IT department. Yes, you got it. Fintech 4.0 is Blockchain-based. Whether the use case is about money transfer, processing and payments infrastructure, wealth management or consumer lending, there are multiple decentralized (or Blockchain-based) applications that are being developed and soon ready to be brought to market.

Here at Amalto, we are bringing to market a Blockchain-based application for all ticketing-based services that pertain to the Oil and Gas industry: Ondiflo. Our decentralized application (DApp) is going to revolutionize trade finance in this segment of the Oil and Gas industry. We definitely witness Fintech 4.0 at first hand and want to share with you what it looks like.

Ondiflo in a Nutshell

The Oil and Gas industry relies heavily on thousands of transportation, storage, and service providers to produce, store, and move products to market. This activity referred to as “ticketing-based services” generates millions of documents each year that cover the entire order-to-cash spectrum, from service orders to final payments.

The current order-to-cash process for ticketing-based services is extremely straightforward in its structure (service requested, service rendered, invoice generated and then approved, payment made), yet terribly archaic in its management due to an absence of automation, integration and electronically-generated documentation as well as an overwhelming predominance of manual tasks. As a result, service providers and their clients are systematically confronted to operational and financial dysfunctions, which engender friction, distrust and overall poor business practices and experiences. Thus, it is not uncommon that up to 30 days go by between the time a supplier delivers a service and the time the client approves the associated invoice. If the payment term is Net 90, the entire process takes about 120 days per service to complete, or 4 months.

Ondiflo brings to market a fully integrated and automated end-to-end order-to-cash solution to enable business partners (service providers, producers, refiners, transporters and distributors) to transact seamlessly and efficiently: Automation of field operations thanks to IIoT (Industrial Internet of Things) sensors and mobile applications that automatically trigger service calls and reliably capture service transactions, integration of back office operations (including payments) with a permissioned-based Blockchain that shares transactional documents among parties and with smart contracts that automate the order fulfillment, invoicing and payment process. Lastly, Ondiflo integrates payment and supply chain financing for vendors.

Ondiflo Under the Hood

The company’s priority is placed on developing a decentralized application to streamline the order-to-cash process inherent to field tickets for water hauling, which represents a $40 billion market in the United States alone. An IIoT sensor placed inside a water tank located on an oilfield triggers an alert as soon as the water reaches a pre-determined level. This alert indicates that service is required. A water truck must then be dispatched onsite to pump the dirty water out of the tank and bring the loading to a water treatment center. It is a 5-step process:

• The field data is captured in the Blockchain via an IIoT cloud
• Orders and tickets are created in the Blockchain via smart contracts and pushed to the trading partners’ workflows. Trading partners include the water hauler, the operator and the financial institution
• Invoices are created in the Blockchain and pushed to the service provider (water hauler) and the client (operator)
• Payments and associated trade financing are triggered in the Blockchain
• Regulators are notified of the operation via the execution of a smart contract

One day after service is rendered, the associated invoice is approved. Payment occurs 90 days later (if Net 90). Ondiflo slashes Days Sales Outstanding by 30 days, or 1 month.

The company uses Ethereum Blockchain to automate all steps of the order-to-cash process associated with field services. The choice of Ethereum further validates this decentralized and distributed platform as a powerful and scalable technology stack.

Ondiflo: Key Problems Solved and Key Benefits

The order-to-cash for ticketing-based services costs the Oil and Gas industry billions of dollars every year. For example, in produced water hauling from well sites (upstream operations), the order-to-cash costs between $80 and $100 per truck rotation (transaction). There are 100 million truck rotations per year from oilfields to water treatment centers and back in the United States, representing a total cost that ranges from $8 billion to $10 billion.

Ondiflo brings the order-to-cash cost from $100 down to $20 per truck rotation:

• Bring Efficiency to Truck Scheduling & Dispatching: As soon as an IIoT sensor triggers an alert that is pushed to the Blockchain via an IoT cloud, all stakeholders are instantly made aware that service is requested. The truck dispatcher uses GPS localization to assign the service request to the nearest available truck. The truck driver acknowledges the request via a smartphone application. The exchange between the dispatcher and the driver is recorded in the Blockchain.
• Full Automation and Integration: Go paperless and faster than ever. Forget unreadable paper field tickets that oftentimes get damaged or even lost, emails sent to back offices that do not get acknowledged in time, and the hazardous manual monitoring of tanks, pipelines and other assets. IIoT and Blockchain eliminate the labor intensiveness that currently characterizes ticketing-based services pertaining to Oil and Gas operations. Overall, labor cost decreases dramatically, and on the field HSE risk (Health Security Environment) becomes negligible.
• Eliminate Disputes on Volume: Ondiflo’s pertinent computation based on a complex algorithm corroborates within a residual margin of error the volume that the service provider handles.
• Generate Lower Day Sales Outstanding: Thanks to the execution of smart contracts, invoices are approved within twenty-four hours of service delivery, and delays in payments are therefore eliminated. Ondiflo slashes Days Sales Outstanding by 30 days. Order-to-cash cycles become far shorter.
• Optimize Cash Flow Management: Benefits of Ondiflo’s Blockchain platform include immutability, which signifies that as soon as a data is written in the system, it cannot be altered. Thus, the platform provides participants with an easy way of verifying intercompany transactions and/or client-customer transactions. It allows suppliers to sell their accounts receivable to a factoring company earlier and at a lower rate.
• Enhanced Auditability: Each data written inside a Blockchain network is validated through the solving of a highly complex algorithm. Moreover, the entire system audits itself every ten to fifteen minutes. Thus, auditors are given access to a digital trail that is irrefutable.
• Full Compliance to EPA, DOT and Other Regulators’ Rules: The Blockchain automates the notification of all operations to regulators via the execution of smart contracts.

To Conclude: Ondiflo’s Goal

Ondiflo intends to disrupt ticketing-based services for the Oil and Gas industry by bringing to market potent decentralized applications that leverage industrial Internet of things.

Five years from now, the company expects to be the catalyst for the following changes:

• 99.5 percent of the transactions inherent to ticketing-based services be completed automatically
• All services be approved for payment within 24 hours of delivery
• Enable the tokenization of most transactions (frictionless finance)
• Provide 100 percent compliance to health, safety and environment regulations through automated regulatory reporting
• Jobs can be bid and allocated on the fly (“Uber model”)
• Integration of more services: Insurance, equipment and maintenance, among others