IBM Global Financing hopes its blockchain solution, outlined here in a video screenshot, will make available more working capital that otherwise would be held up in transaction disputes with customers and partners.

IBM Global Financing hopes its blockchain solution, outlined here in a video screenshot, will make available more working capital that otherwise would be held up in transaction disputes with customers and partners. Photo: IBM Corp.

International Business Machines Corp. expects to go live as early as September with one of the largest commercial uses of blockchain, the online ledger technology that underpins bitcoin.

The implementation, which will help its financing unit resolve disputes with customers and partners, could send a signal to a market where enormous amounts of money have been invested in blockchain companies and their technology. The move also will make IBM one of the largest organizations to date to shift beyond limited tests of the emerging technology to real-world business transactions.

The system is expected to free some of the $100 million in capital tied up at any given time in transaction disputes in the IBM Global Financing unit, said Jerry Cuomo, vice president of blockchain technologies. Blockchain is touted as a way to make many markets and functions more efficient by removing the middleman.

The business unit deals with 4,000 suppliers, financing customers and partners who conduct about 3 million transactions per year, worth $44 billion. About 25,000 disputes arise annually over issues such as the wrong number of computer parts in an order or deliveries that go awry, Mr. Cuomo said.

Today, resolving such a problem takes an average of 44 days and requires employees to retrace steps through six or seven separate applications, as well as sometimes contacting banks and other parties involved, he said. Recording transaction details on a blockchain ledger makes tracing details faster and potentially more accurate than IBM’s current processes, he said. The new system runs in parallel to IBM’s existing finance applications, using custom code to collect data at key points in the course of a transaction, such as when a purchase order arrives, when a shipment goes out and when payment is made.

In tests during the past few months, IBM has cut resolution to 10 days, he said.

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He declined to estimate the potential savings, but solving each problem faster would, in turn, free up capital faster. “We don’t have the $100 million locked up,” he said.

IBM eventually plans to sell the internal dispute resolution software as part of its IBM Blockchain platform, but has not decided when or at what price.

More than 40 big banks and financial firms are testing blockchain as a secure and transparent way to digitally track the ownership of assets. Few have moved beyond experiments, held up by uncertainties about scalability and questions about how current regulations may apply to blockchain transactions. Nasdaq went live late last year with an exchange for private companies to issue debt and security that it built on blockchain technology from Chain Inc.

Now some companies are showing interest in blockchain as a means to streamline supply chain operations, including Toyota Financial Services, which could track auto parts between factories and countries. Startup Everledger said this month it is working with IBM on a blockchain system to manage the chain of transactions of high-value goods such as diamonds from mine to sale.

Photo: IBM Corp.

IBM is considering using blockchain internally in other ways, including tracking parts from its own suppliers, said Arvind Krishna, senior vice president and director of research at IBM.

Companies with large networks of suppliers are “very excited” about blockchain, said Don Tapscott, CEO of The Tapscott Group, a think tank, and co-author of the book, “Blockchain Revolution.” The idea is that everything in a supply chain could have a permanent searchable record and its provenance would be known.

“When you think about buying a burger in a store, you could know everything about what the animal was fed, what type of antibiotics, and how it moved through the supply chain,” said Mr. Tapscott.

A company like IBM may not be worried about cows but closely tracking components such as chips used in the computers it builds could help ensure they’re not counterfeit. For example, the company could more easily determine later the source of faulty components if a product eventually breaks, he said.