JPMorgan Drives into Blockchain-based Auto Dealer Lending

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JPMorgan could be about to take blockchain banking on the road thanks to a patent filing that would allow them to revolutionize the practice of ‘floorplan lending’, a financial instrument that allows car dealers a line of credit based on their auto inventory. The concept would remove the need for manual inspections of inventory and would ensure that the dealership’s ledger is automatically updated with stock movements.

Streamlining of a Manual Process

Floorplan lending involves the bank, in this case JPMorgan, extending a rolling line of credit to auto dealers based on the total value of the cars on their lot. Of course these stock levels need to be verified, a process that currently necessitates the periodical verification of vehicles by a person who has to visit the dealership, log the vehicles, compare it with the stated inventory, and update the account based on the results.

JPMorgan wants to remove the middle man by tying up each vehicle’s identity number (VIN) to the blockchain, which, in tandem with other technologies such as geolocation and telemetry, would allow the inventories to be immediately and trustlessly updated. This would eliminate the need for personal visits and dramatically streamline the auditing process, easing the pain for all parties and reducing costs across the board. The process would further utilize Quorum, the privatized version of Ethereum that JPMorgan uses for all its blockchain projects, including its forthcoming JPMcoin cryptocurrency.

JPMorgan Not Alone

JPMorgan are not alone in pioneering blockchain-based floorplan financing. Indian conglomerate Tata group has also been looking into the potential of using distributed ledger technology to enhance the process, stating that the “combination of telematics and blockchain in auto floor plan finance can…deliver benefits like enhanced transparency, reduced credit risk, and quicker disbursement leading to better cash flow for dealers.” They do however note that there are some drawbacks that will need to be addressed, but that “the benefits far outweigh the difficulties”.

Blockchain and the automotive industry have been bedfellows for some years, with potential implementations of the technology ranging from in-car micropayments in exchange for data to having car service histories recorded on the blockchain to ensure transparency and vehicle authenticity.