Modern weapons for an ancient problem

The title was supposed to be Remove the need for third party trust from automated invoicing processing using blockchain ledgers to capture gateway communications. It just wouldn’t fit on the menu, sorry.

You can find our Hack code in the repo here: https://github.com/monkeypants/slays_the_bridge_trolls

Digital technologies create a unique opportunity for Australian business efficiency, international competitiveness and innovation:

E-Invoicing is topical because of proven national productivity benefits that could be secured. The Billentis 2015 study commissioned by the Treasury Department, conservatively estimates a productivity saving of circa $3bn in business to government trading. Our team estimates approximately 2bn invoices are exchanged between businesses in Australia each year and that 85% require manual handling. Automation could potentially provide up to $12bn per year benefits, based on a successful, national scale implementation of e-invoicing. In addition we estimated the addressable invoice transaction value at circa $4trillion, translating to an innovation opportunity to industry from releasing $600bn of locked away cash flow from the supply chain.

Blockchain distributed ledgers are also topical currently. The technology is proven by Bitcoin as an effective alternative to expensive and cumbersome third party process curating for trust purposes, typically provided by banks. Several new blockchain ledgers have developed separate from bitcoin including Hyper ledger and Etherium. The proposition for these distributed ledger platforms is to provide an immutable and fraud free record capability to parties where trust is an issue. The team members have separately developed similar hypothesis prior to GovHack that Blockchain technology could provide a valuable new basis for trade. Currently our view is that the chaotic and paper heavy approach to completion of B2B transactions is rife for innovation and disruption. Automating invoice processing between trading parties, intercepting the machine generated messages and document states, storing these in an immutable block chain, effectively takes junk information and turns into financial grade information.

The role of Government data and APIs

ABR is the most comprehensive source of all Australian business identities available. ID verification, location and electronic trading capability are the key pillars of electronic invoicing. The authoritative ABR data is the key to building a national, commercial grade interoperability e-invoicing framework therefore.

We also would like to have utilized the Vanguard metadata registry. Vanguard is anauthorization and authentication service for Business to Government transactions, administered by Department of Industry and Innovation. If you are an Australian registered business you are entitled to an ‘AusKey’ credential that will enable identity authorisation to Government via Vanguard; that could be extended to any business to business transaction. We have created a mash up in elastic search in our hack instead to simulate the use of such a meta data register. Our solution simulates an OIDC Identity Provider for authenticating Australian Businesses (and providing consent-based authorisation) that leverages existing Commonwealth capability in Vanguard.

The national productivity benefits promised by a national eInvoicing system

The benefits are significant to successfully automating invoice processing between trading parties. At a national level productivity gains we estimate could be as high as $12bn. Harder to quantify are the innovation and international competitive advantage benefits. However the types of benefits we expect include:

  • Reducing buyer and seller costs associated with invoice processing
  • Improve accountability and counter-party trust
  • Access fast repeatable cash flow solutions at an acceptable cost.

FSI’s can loan profitably against invoices and at scale due to ‘straight through’ business loan processing:

  • Improved international competitiveness by reducing trade friction.

According the Billentis 2015 report on e-invoicing, ‘The vast majority of industrialized European countries passed through the unstructured bottom-up development in phase one, followed by a more structured process in phase two. The semi-structured process is often initiated by open-minded E-Invoicing service providers. They define on a voluntary basis some rules for an improved interoperability between their platforms. They also build online information platforms and push the visibility of the topic E-Invoicing with the aim of pushing market development. Although big progress has already been made, is it almost always necessary to have the public sector on board for a fully structured and strong uptake of the market. However, the usage of E-Invoicing remains voluntary for all stakeholders. With this structured approach, the market adoption rate after a decade is typically 20-30%.’

Currently in Australia the bottom-up method is prevalent resulting is a network of implicitly trusted gateways, which are closed rely on proprietary standards to provide security and have a cost. The team concludes that we can evolve the approach through a peer-to-per model supported by government and using government trusted data to authenticate identity and location. Ultimately we believe this will result in new and fundamental value creation for industry through e-invoicing by:

  • Maximizing liquidity by pushing trust and sophistication to the edge of the network
  • Reducing the cost by making an open interoperability standard and free. A situation designed to maximise the traffic to the network, seek situations that maximise the volume and hence value of the network to the traffic
This is why we intend to demonstrate key elements of a working eInvoicing system that:
  • links the identity of Australian businesses back to a trusted source, even in a social media context
  • replaces the existing complex infrastructure with a simple transport layer using cryptographic protocols
  • deploy blockchain ledgers to make gateways accountable for preventing collusion,
  • shows how a smart e-invoicing protocol design can reduce the cost of finance to Australian businesses, more than doubling the projected national productivity dividend currently anticipated by e-invoicing proponents.