JP Morgan Will Use Blockchain to Monitor Dealers’ Financed Car Inventory
Error (or fraud-) prone recording of auto inventory will be a thing of the past after JP Morgan implements blockchain.
Wholesale car financing at JP Morgan will soon get a lot easier. The bank is planning to put auto dealers’ floorplan lending onto a private blockchain, or a distributed ledger.
Floorplan lending is the revolving line of credit provided by a bank against vehicles forming a dealer’s unsold inventory.
What JP Morgan is planning on blockchain
JP Morgan’s car financing unit, Chase Auto, has applied for a patent to digitize floorplan lending using the blockchain, according to coindesk.
This will make the system much more efficient compared to the current human-based system of auditing the floorplan inventory.
Unfortunately, there have been cases where dealers have fraudulently pledged the same cars with different banks, a practice called “double-flooring.”
However, JP Morgan’s blockchain-based system will rely on the vehicle’s unique Vehicle Identity Number (VIN), which is issued to every car in the U.S.
The bank will use this number in conjunction with sensors that track the vehicle and record the data in real-time on a distributed ledger. This would avoid errors or frauds in inventory, and therefore the credit granted.
The bank is currently testing the system in pilot mode at actual dealers.
The whole industry will benefit
“Because of the unique identifiers, telematics, the auto industry and its counterparties are a great way to get adoption out there quickly and that will drive efficiencies into different areas of finance,” said Kevin Point, head of research and development at Chase Auto.
Meanwhile, JP Morgan has also developed the Quorum blockchain, its own customized version of Ethereum. Potentially, the new application in wholesale auto financing could mesh with JPMCoin.
JPMCoin is a tokenized payment system under development by the bank.
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