Paystand’s new dynamic discounting feature leverages blockchain’s strengths while positioning the company as a leader in the blockchain-based economy.
Built on ethereum smart contracts, dynamic discounting lets companies set terms based on their preferences while being backed by smart contracts.
“Paystand’s first-of-a-kind dynamic discounting application puts the power in the hands of AR by allowing them to initiate dynamic discount offers that are auto-executed via smart contracts, with digital funds transfer over a verifiable, blockchain-based network,” Paystand founder and CEO Jeremy Almond said.
“With a zero transaction fees model, AP teams don’t have to split their cash discounts with a third party.”
How dynamic discounting developed
Dynamic discounting is the latest development for Paystand, which acquired AP-focused firm Yaydoo. Almond said these developments enabled a radical re-envisioning of how money movement happens in the supply chain. Money is now software, so why can’t the process of how it moves to be automated?
Following the theme, Paystand leveraged a smart contract’s ability to auto-execute and applied it to invoicing. Almond was surprised no one beat him to it.
“We were surprised that there hadn’t been an application that used smart contracts and blockchain which auto-executes economic terms and applies them to what businesses use the most. Those are invoice terms that are defined on a ‘the sooner you pay me, the better there’s a discount,” Almond said.
“Classically, businesses do some basic discount, two percent for paying within 10 days. A business should be able to operate that dynamically now, in a very open way that helps companies have better cash velocity.”
Smart contracts are the key to dynamic discounting
Almond said smart contracts are the dynamic behind discounting. Instead of setting rigid terms, it can be integrated through the ERP to offer variable rates based on the day something is paid.
In the future, he envisions smart contracts that can be rewritten based on interest rates or other factors. Both sides can participate, with companies scoring on creditworthiness, capital cost, and repayment potential.
Supply chains are being rebalanced, Almond said. It’s slowing down in some regions and accelerating in others. Companies are adjusting toward more distributions closer to home.
Those who experienced Asian and European bottlenecks are nearshoring to Latin America as they seek stability for the looming holiday season. CFOs are careful in how they deploy capital to maintain the appropriate velocity.
“That’s true in how they deploy capital in a dynamic discounting environment with the partners,” Almond said. “It’s also true with how they think about their payment infrastructure. Because they’re often moving their buyers and suppliers relatively dynamically, they need to be able to do that effectively.
“(Most run) through a massive paper trail, which is how much traditional credit is done and how much traditional sort of payment infrastructure is done. The finance organizations that are the most nimble and able to rebalance the fastest are in the best commanding position. And that’s been very interesting, particularly manufacturing and distribution in the U.S.”
Almond’s early blockchain bet
Credit Almond for seeing blockchain’s potential and jumping at it. But arriving before everyone else means waiting for them to catch up. Did Paystand have to educate the marketplace on blockchain technology and how it would improve AP/AR?
Almond likened it to those who made early bets on cloud technology. Two decades ago, most companies couldn’t explain what was under the hood, but they knew they could deliver products and services better, faster, cheaper, and more efficiently.
Today companies know enough to know they have to go digital and become more efficient. It’s a strategic advantage. Like how the cloud is now table stakes, blockchain-enabled systems will be a decade from now.
“If you assume money is now software, just like everything else, it should be rapidly more effective, efficient, and at a lower cost,” Almond said. “So, in theory, money should be able to be moved instantly. It should be able to be wholly automated and self-driving for your cash cycle. And there should be no or minimal fees because moving ones and zeros back and forth should be very low cost.
“So the conversation with the CFO is if they can get their money much faster, and improve their cash velocity if they can automate that process so they can supercharge their AR team, they can automate what they’re doing. They can do way more with less than in this era. Isn’t that great if you can improve your bottom line by eliminating all the costs from wires, checks, and credit cards?”
The parallels between blockchain and internet
Almond sees blockchain and crypto reaching a usage inflection point. It’s roughly where the Internet was in the early 2000s. Follow the progression, and the tipping end is coming.
For industry, it means lower costs and higher infrastructure efficiency. Smart contracts, dynamic discounting across supply chains, tracking those supply chains, and even insurance delivery are areas to watch.
Almond also monitors developments in cryptocurrency, including Bitcoin Lightning. Paystand offers a corporate rewards card that delivers points in bitcoin. It provides CFOs with an easy way to dip their toes in crypto without the risk of being locked into travel points or a specific brand. Over the six months since its introduction, the card has seen 400% growth.
“Here’s a way they can access next-gen financial instruments,” Almond said. “They can engage in, understand, and participate in the open market because they can trade those points for travel or other things. It educates the CFO and enables them to understand where technology is going. It’s similar to them being very early as a customer of Salesforce or NetSuite, so they’re better positioned to lead their organization going forward.”
Almond sees opportunities to improve global payment infrastructure. It currently functions within regions on, in some cases, 50-year-old infrastructure. Enter blockchain.
“As the supply chain has more global payment infrastructure, we believe blockchain can, and DeFi in general, accelerate the economics across companies’ supply chains, and ultimately regions. I think we’re early there, but one of our bets is that globalizing the infrastructure is one way to improve the economics for these companies.
“And I think we’re just scratching the surface there.”
Tony Zerucha is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.