Tradeshift Proposes Plan to Protect Denmark’s Supply Chains From COVID-19 Crisis

7 May 2020

Tradeshift, the digital trade finance platform that uses blockchain to make payments instant and transparent, has proposed a scheme to the government of Denmark that will free billions of dollars from supply chains, the startup says.

The COVID-19 crisis, like the 2008 financial crisis, has seen companies stretch payment terms and try to preserve cash, which causes a ripple effect down the supply chain and makes the overall situation steadily worsen.

Tradeshift’s plan is to motivate big companies that have applied the brakes, to pay their suppliers instantly rather than delaying, thus preventing further calcification of supply chains and possibly keeping many small and medium-sized enterprises (SMEs) from going under.

There is a cost involved in this, however. Offering the necessary additional credit lines to 250 of the biggest exporters operating in Denmark – as a carrot to get them to pay their suppliers immediately – would cost about 1.5 billion DKK (US$217 million) in interest, which Tradeshift is asking the Danish government to stump up.

In return, this would release about 385 billion DKK ($55 billion) over the coming months, says Tradeshift, which is already working with the government’s Danish Export Credit Agency (EKF) as part of a COVID-19 scheme to ensure trade finance insurance remains in place.

“We need to change the fundamental instinctive behavior of corporates in the current situation,” said Tradeshift co-founder Mikkel Hippe Brun. “These are very solid companies that will survive the COVID-19 crisis. The risk of providing them with extra liquidity so they can save their supply chain is very low.”

The media office of the Government of Denmark did not return requests for comment by press time.

Read more: Tradeshift Says It’s Slashed Cross-Border Transaction Costs Using Ethereum

The Danish-born, San Francisco-based Tradeshift, which built the first “e-invoicing” scheme in Denmark, has been implementing instant payment programs for years, digitalizing the whole trade process to accelerate payments between big buyers and their suppliers. Over the past two years, the unicorn-status startup has added blockchain to its tech armory, providing an even more transparent and easily auditable system for invoices and purchase orders.

“All of the COVID-19 programs we are doing in Denmark come at a cost to the taxpayer. This is one of the cheapest things you can do in any economy,” said Hippe Brun, citing the work of Aarhus University economics professor Philipp Schröder, who is involved in Denmark’s COVID-19 response planning. “What we need now is the government to step in, to provide insurance for the economy, but also help out and incentivize the corporates to pay now.”