Peter Townend

Blockchain in the Leasing Industry

As we have seen, blockchain and distributed ledger technology offer several key advancements over existing technology – secure ID verification and disintermediated execution of encrypted and tamper-proof records, ability to transact and record high volumes of transactions with low costs, as well as avoidance of a centralised database being the single point of failure due to data corruption or cyber attack. 

In simple terms, leasing companies have two central activities: money lending operations, in the form of purchasing assets to lease to customers with ongoing contract payment servicing, and, as a distinguishing feature from other forms of funding, a vested interest in the value of the assets they own whilst on lease.  The leased equipment acts as both loan collateral and, depending on the type of lease, needs to realise the priced-in future residual value when disposed of at the end of the lease period via disposal channels.  Factors affecting the residual asset value include end user asset usage or consumption, history of servicing, repairs and maintenance, as well as fluctuations in the open market value of the asset model, type or class due to external factors such as increased obsolescence due to technological changes or regulatory impacts. 

Money lending operations and asset management are both areas that blockchain can provide a disruptive influence on, bringing advancements in security, automation, speed and cost reduction. We’ll look in more detail at areas of potential use and emerging blockchain based applications within the leasing and asset finance domain next.

Financing Operations

Accounts payable invoices and supplier payout: the blockchain can use secure ID tokens for one-off setup of equipment suppliers and then be used as part of fiat currency payout process for the AP function, reducing fraud due to identity and error in the payout process.

Accounts receivable: collection of rental payments due from customers can utilise more secure processing, using Smart contracts for fulfilment and execution where criteria are met (ie rental instalment is due).  The transaction cost offered by blockchain is estimated at around 70% to 90% lower than traditional banking costs, particularly for cross border payments. This opens up the possibility of lessors offering microleases to lessees, which could open up markets in developing countries and for low-value equipment hitherto uneconomic to provide on a leased basis.  Micofinancing by the likes of PayPal, Apple and Amazon support this trend. Blockchains’ strengths also play well to the current trend in subscription-based services, eg ride sharing apps, which are low cost and need to transact small values but frequently.  A useful example shown by JP Morgan’s Interbank Information Network (IIN) showing how blockchain technology has been used to create an interbank information exchange for real-time payment approval verification.

Client on-boarding and document management: as part of lease contract underwriting and inception, blockchain could utilise smart contracts to auto-execute steps when credit and contract underwriting criteria are met, providing a more seamless customer experience, with documentation stored securely and immutably.

Asset Management

Supply chain: As assets are assembled during manufacture, blockchain supply chain management (SCM) is already being used to track both the source and location of components and overall build process, as well as the logistics for final delivery. For complex equipment, a lessor can therefore track the current completion status with their suppliers and ensure delivery/completion deadlines to the customer end-user are maintained per the lease contract. Knowing the provenance of all components is also useful due to trade or regulatory restrictions

• Several blockchain based asset management platforms are already available: Treum is a blockchain-based platform for modelling business processes, tracking assets, and Adopting blockchain for enterprise asset management.

Connected equipment: the increasing use of connected equipment, both in the home and business, requires secure transfer of often a high volume of transactions, and blockchain is being explored for this purpose. Lessors need to ensure their equipment is being maintained as per recommended manufacturer service intervals, and any maintenance issues are dealt with efficiently to avoid costly damage.  Leased equipment can relay self-diagnostic information to both lessor and third party service/maintenance providers securely, frequently and cheaply using blockchain based applications and networks. Blockchain can also be used so complex medical equipment and robot/assembly plant can provide pre-emptive diagnostic information, where downtime due to a fault or unplanned maintenance is expensive.  The repairs or maintenance automatically requested by the equipment can be sent automatically to permission service providers so they can bid to win the work, with smart contracts executing fulfilment.

Asset Management: as autonomous cars, trucks, ships and drones have no ‘owner’ in charge to effect servicing and maintenance, blockchain is being used provide the secure data exchange platform between vehicle, support infrastructure and third party maintenance providers. The actual asset owner (lessor) would want to track that the asset is being used and maintained per the lease contract, track the amount of offline and ready-for-use availability (if rentals are dependent on usage) and could even follow asset location history using geotracking facilitated by blockchain networks.  Refer to the Decentralised Autonomous Vehicles Foundation for a good example of how blockchain is being used in this area.

Usage or consumption-based billing: the trend is for lease rentals to be aligned with the amount of asset usage. Shared asset use or pooling is also becoming more commonplace to ensure expensive capital equipment is fully utilised.  Asset usage could therefore require billing to multiple parties.  Blockchain can assist in automating these administratively burdensome activities – for example, asset renters would have their secure ID logged by the asset at point of use and then usage information securely transmitted via blockchain to the lessor, who can then create the required invoicing.

Recycling/upgrade/refurbishment: in the circular economy, on-lease assets nearing end of contract term may be sold, upgraded, recycled or used for further onward ‘secondary term’ leasing.  Using blockchain, the equipment itself can provide self-analytical data so the lessor can gain useful information to assist with decision making about optimising value when the asset reaches the end of the lease period.

Car Industry

The car industry is already leveraging blockchains’ inherent strengths to allow drivers, vehicles manufacturers and dealerships to seamlessly and securely connect to enhance the customer experience.  The technology is already poised for use by forward-thinking manufacturers.


This article looked at blockchain uses in the leasing and asset finance industry – in the next article, I will look at the emergence of blockchain technology applied to ERP systems, and how ERP system vendors like SAP and Oracle are enabling customers to augment areas of their ERP applications to leverage the benefits of blockchain and distributed ledgers.

About the Author

Financial Application Consultant and Project Manager with 20 years experience of consulting and delivery of financial and accounting transformation initiatives across sectors such as Retail and Investment Banking, Leasing and Asset Finance and other Financial Services. Peter has executed lead roles on numerous ERP and finance systems transformation programmes. His excellent client facing communication skills add to core strengths in project management, business process analysis, system selection and implementation, accounting design, data migration and reconciliation.

VIP Apps Consulting provide business process management and technology consulting services. We develop and implement unique solutions to enable organisations to address their challenges and become high-performance businesses, creating value through innovation and process optimisation.

We operate in the intersection of technology and business, combining deep business and industry insight with the understanding of how technology and innovation impact the industry and business models.

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