Populous (PPT)— Invoice Discounting on the Blockchain— Analysis of token + business model

Populous is targeting the glamorous world of invoice discounting, by putting the business onto the Ethereum blockchain through a P2P auction-style platform.

Published in

Trivial.co

10 min readNov 22, 2018

It allows invoice sellers access to a global market for liquidity, while providing invoice purchasers transparency, security, and other benefits of the blockchain in their investment. In a nutshell, Populous is a platform that allows invoice sellers to receive short-term loans from investors, utilizing their invoices as collateral.

In order to understand what “invoice discounting” is, it is first important to understand the concept of factoring, which is the more common financial business today.

Invoice factoring is the business where a financial institution provides cash to a company in exchange for ownership of the company’s unpaid invoices, known as receivables. Small to medium sized companies typically experience periods where they need cash in their business cycle, whether it is to pay their vendors, pay their employees, purchase raw materials, or generally fund operations. In an ideal world their business cycle allows them to collect cash from their customers in time to make these payments, but it is often the case that either the business cycle does not line up, or there are periods where a business’s clients are slow in paying off the invoices.

In these instances, companies will go to factoring institutions and sell their outstanding invoices in exchange for immediate cash, similar to how individuals may sell their future paychecks for cash through payday loan companies. The factoring company will buy the company’s invoices at a discount, and then try to collect the full invoice on their own for profit.

Businesses prefer to use factoring companies because it is simple and immediate, unlike bank loans which will typically require background checks and a long approval process. It also means the business doesn’t have to worry about invoice collection, which can be difficult. Advances typically range from 70%-85% of invoices, with interest rates typically below 5% per 30 days.

Unlike invoice factoring, when invoice discounting the invoice is not permanently purchased. The invoice purchaser loans the money to the business, and then legally holds the invoice until the loan is repaid with interest. Then the invoice is given back to the business for them to collect on their own. This is important because it means the burden of collecting the invoice is removed from the invoice purchaser. For the invoice purchaser, the invoice is only held as collateral to encourage the seller to pay the loan back. This makes sense because in a P2P setting you cannot expect every invoice purchaser to go out and try to collect the invoices. Invoice discounting typically demands a more mature and stable business, considering that the lender has less recourse if not paid back, and the business must have the resources to go after its clients if they are not paid.

For those who haven’t been counting, the word ‘invoice’ has been mentioned 24 times — sorry about that, but this is the thrilling world that Populous inhabits…

How it works

As a P2P auction-style platform, the Populous platform is divided into invoice sellers and invoice buyers. The platform utilizes tokens called Pokens as the currency of the platform, which are pegged 1:1 with the fiat currency of the country that the invoice is from. Pokens (no idea why they chose this ridiculous name if they wanted to be taken seriously) are used to purchase invoices on the lending platform.

The platform also has PPT tokens, which are utilized to invest in invoices. Only PPT tokens will be circulated outside of the platform amongst investors, while Pokens will be entirely used inside the Populous ecosystem. PPT tokens are required to attain Pokens.

The platform will largely vet companies through XBRL data. XBRL stands for “eXtensible Business Reporting Language” and is a global standard for defining and exchanging financial information. This standard is popular in the UK, although not yet widely adopted in other regions.

Populous expects to leverage the XBRL data to analyze the credit-worthiness of companies, with which investors can charge varying interest rates according to their risk profile. The Altman Z-score formula is to be used to gauge each invoice seller’s risk profile. This formula provides predictive measures for a business’s risk of bankruptcy, risk of default, and a measure for financial distress.

There is of course much to be said about the accuracy and applicability of these measures across businesses in different industries and countries, and investors will probably need to do significant personal due diligence before investing.

Invoice Sellers

Invoice sellers are typically businesses that have a proven track history as determined by the Populous platform. Invoice sellers will first upload their invoice onto the Populous platform alongside all necessary documentation. The platform will review the invoice across various pertinent data, and then place the invoice in the marketplace.

Invoice buyers will place bids once the auction has begun. When the auction is complete, the seller will then select the preferred invoice buyer and receive funding in exchange for ownership of their invoices. It should be noted that invoice “sellers” is something of a misnomer since the invoices are not permanently sold, but rather “borrowed” by the investor to hold as collateral to ensure the invoice seller pays them back.

Invoice Buyers

Invoice buyers are investors who are seeking a return on their investment by providing what are effectively short-term loans to the invoice sellers. Invoice buyers must first go through a KYC approval process with the platform. Invoice buyers will then be able to browse auctions, join bidding groups (pooled investments), and bid on auctions. These investors will utilize the native “Poken” token to bid on invoices.

Stats & Metrics*

*(as of 22 November 2018)

Marketcap — $96,429,000

Price — $1.81

Cost to join Vladimir Club (own 0.0001% of tokens): $9,639

Supply — 53,252,246

Unique Addresses holding tokens — 26,818

Top 20 Addresses hold 53% of the Supply.

Roadmap — Where are we?

Populous does not maintain a formal roadmap. The project originated in November 2016, with the white paper published in February 2017. The ICO took place in July 2017 (raised $10M), and public beta was released in November 2017.

The platform is currently allowing potential investors to apply and verify through its KYC process. The platform’s invoice sale platform has only seen limited activity, with the first invoice sale occurring in May 2018 through a group of sixteen bidders.

Populous has stated that its focus in the first few years of operation will focus on building a solid foundation for sustainable growth, with marketing to secure SMEs in the UK and China/HK.

Notable Partnerships

Cashaa (May 2018)— blockchain banking platform featuring a digital wallet that enables users to store, save, spend, receive, borrow, and get insured. Cashaa’s wallet provides Populous users with an additional mean of access to their spendable Pokens.

Luxure Global Citizen (cancelled)— in 2017 Populous proudly announced a £1 billion agreement, but this was later terminated by LGC in order to start their own “LGC-Coin”

It should also be noted that Populous maintains a Business Intelligence arm in addition to its Invoice Financing business. The BI platform focuses on utilizing XBRL technology (also used in the invoice financing platform to vet companies) to provide datasets and analysis tools to create informative industry and business reports for clients. It appears to be a natural offshoot from the invoice platform’s need for accurate and thorough business analysis through its XBRL data.

Team

Steve Williams — CEO & Co-Founder — Leads both the Invoice Discounting and Business Intelligence arms of Populous. Previously, he founded Olympus Research, a UK firm specializing in commercial data, analytics, and insight on businesses. Other work experience includes 14 years as a publisher of Tramp Magazine (aspiration-focused media). He holds a BA in Philosophy from London Metropolitan University.

Jason Tuang — Head of Finance — Prior to Populous, he worked as Audit Manager at S.M. Tuang & Co., where he performed audit planning and reviews of statutory financial statements to ensure compliance. He was also an Audit Associate at KPMG Malaysia.

Wisdom Oparaocha — CTO — A smart contract and React/Redux software developer with history of projects in the FinTech industry. Prior to Populous he was CEO of MicroDApp, which appears to be defunct. His educational background includes a Master of Engineering — MEng from the University of Manchester.

Overall, Populous maintains a team of ~14 members with a balance between software development and operations. It should also be noted that this team is working on both the Business Intelligence platform as well as the Invoice Financing platform simultaneously.

Competitors

Hive — is the only other noteworthy blockchain-based project that is working on invoice financing or factoring. Hive’s goal is similar to Populous in establishing an open and easy to use platform for invoice financing through the blockchain.

Established in September 2017, the Hive project soft launched HiveTerminal in September 2018. This now allows KYC approval process for would-be investors. Overall, this is an active but comparatively immature invoice financing project that is hoping to be a significant competitor to Populous.

The main competitors include all mainstream factoring and invoice financing companies, which even include Amazon and Paypal, established players like Comdata and well funded startups like Fundbox.

Its too early to say whether blockchain allows a significantly more seamless and accessible experience for investors and debtors.

Concerns

Drawbacks of invoice discounting — Invoice discounting is very risky for investors because there is little recourse outside of just keeping the invoices. With factoring, the invoice purchasers are typically experienced in collections (which may include legal action), but with invoice financing the investor is holding the invoices hostage in the hopes that they get paid back.

If the business fails, and cannot pay the loan back, then the investor is simply holding invoices which are largely useless aside from perhaps selling to a factoring company at a hefty discount. This is why invoice discounting is typically only conducted for medium to large sized established businesses.

However, this also means investors need to rely on the Populous platform to properly vet their businesses, which may be difficult especially when considering that many of the early invoice sellers will probably be smaller companies who are willing to experiment with an unproven platform/technology.

Limited reach — One of the advantages that Populous has over current systems is the potential wide and global access to investors for companies to sell their invoices to. However, with this comes a significant amount of compliance and regulatory issues that the current team does not seem well equipped to face. As such, Populous is expected to only be available in the UK in its early stages. XBRL also appears to be a limited platform that mostly maintains data on European companies.

Controversial Founder — There is ongoing controversy and research conducted by community members with regards to founder Steve Williams’ history of potential fraud and/or issues with the law. Community members have obtained court documents stating that the founder had served jail-time regarding illegal deceptive money transfers in 2008–2009. Steve Williams has confessed to this history, and it is up to investors to determine the legitimacy of this project and the founder’s faithfulness to its success.

Major partnership cancellation — One of the significant partnerships announced for Populous was a “$1.3 billion” partnership with Luxure Global Citizen, a popular global rewards platform. After this announcement in September 2017, the extent of this partnership was scrutinized in the following months, including criticism that the agreement was only for 10% of invoices from LGC, a company showing less than a million in assets. Founder Steve Williams ultimately announced that the “Deal has been cancelled” in a February tweet. Luxure Global Citizen would announce its own cryptocurrency in the following months.

Summary

Logically, the benefits that blockchain can bring to an invoice financing platform make sense. An online verification and auction platform would allow significant increases to liquidity that would benefit both buyers and sellers in a large and transparent market.

However, as with many projects working to introduce real-world finance and accredited investors into blockchain, the regulatory hurdles are significant, and the Populous team does not appear to have the expertise or breadth required to overcome this anytime soon.

Still, the project is the leader in a very limited niche with only one major blockchain-based competitor, and the team is making transactions on its platform. The key for real success will be getting more than just a handful of companies to utilize their platform.

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