Visa’s Blockchain Innovation set to improve access to global markets

Visa (NYSE: V), along with partners Agrotoken, Microsoft and Sinqia, is venturing into new technological territory with a blockchain-based programmable finance platform for small and medium-sized businesses (SMBs). The primary beneficiaries of this innovation will be farmers who will be able to securely finance and sell their crops, revolutionizing how small businesses engage with global capital markets.

This technology was developed as part of the latest LIFT Challenge, which aimed to explore innovative use cases for Brazil’s central bank-issued digital currency (CBDC), Real Digital. Visa was among the nine finalists charged with this task.

The platform, designed to facilitate interoperability between currencies, improve operational processes and unlock new growth opportunities, enables SMEs to access global capital markets more efficiently. It is aimed at easing the existing economic pain points for farmers, who are often at a disadvantage due to localized market structures.

Historically, farmers have relied on financing methods such as factoring, where future receivables are sold at a discount to finance immediate needs such as buying supplies and paying wages. Such methods often lead to a significant loss for the farmer. However, Visa’s prototype offers local farmers more timely and increased access to a global pool of investors, ensuring better price discovery for their goods and adding more options to finance their business.

Catherine Gu, Global Head of CBDC for Visa, emphasized the central role small businesses play in local economies. She stated: “Small businesses are important contributors to our local economies, for example in Brazil where they employ over half of the population and contribute to almost a third of the country’s GDP. At Visa, we are committed to helping them grow, and explore new technologies that will enable them to more easily maintain and grow their business.”

The programmable aspects of digital currencies offer opportunities for more efficient use of capital and reduced counterparty risk. They ensure the delivery and payment of assets and currencies only when certain conditions are met. The prototype platform from Visa enables farmers to tokenize traditional financing contracts, essentially turning existing Brazilian legal documents into a tradable chain Non-Fungible Token (NFT).

Anderson Nacaxe, Director of Agrotoken in Brazil, commented on the collaboration, “Agrotoken has a mission to democratize the agricultural business by making transactions with soy and corn more accessible. To achieve this, we have chosen solid partners, such as Visa, to join us on our journey towards this goal.”

In addition to tokenization, Visa implemented a new auction mechanism for sealed bids on the chain through smart contracts, allowing a global pool of blockchain investors to participate in the funding process. This resulted in competitive pricing. Furthermore, Visa’s Universal Payments Channel (UPC) ensured future interoperability between digital currencies across different markets and networks.

The leap into blockchain-based programmable financing by Visa and partners is an indication of the enormous potential blockchain technology has for SMEs. By increasing access to global capital markets and simplifying processes, this innovation could be a game-changer, bringing increased growth and sustainability to small businesses, especially in the agricultural sector.

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Image: visa