The economics and algorithmics of an integral settlement procedure on B2B networks

26 Pages Posted: 3 Sep 2021

See all articles by Massimo Amato

Massimo Amato

Bocconi University - Department of Policy Analysis and Public Management

Nazim Fatés

Inria Nancy

Lucio Gobbi

University of Trento - Department of Economics and Management

Date Written: September 1, 2021

Abstract

We develop the economic and operational foundations of a new method of financing companies’ financial obligations. In this new banking business model, a network funder sets an optimal combination of netting and financing. Given a network of companies and their respective invoices,
and under the condition of a full settlement of the invoices, the netting procedure consists in applying a multilateral netting algorithm to the network, conceived as an oriented multi-graph. This algorithm introduces a new method of exploration: during regular periods of time (i.e. monthly, weekly, or even daily sessions), the set of invoices is found that maximises the amount of debt offset, given a quantity of loanable funds. From a systemic point of view, the algorithmic exploration of the multigraph is subject to optimisation constraints. The exploration finds those configurations which allow the network funder to manage a policy trade-off between the maximisation of both the total value of invoices and the number of companies involved in netting, and the minimisation of the amount of financing needed to settle payments in full. To test our method, we use an empirical dataset from Infocert (electronic invoices operator) consisting of more than 60,000 companies. The policy trade-off shows that it is economically significant and feasible for a network funder to reduce the financial need of about 50% of companies by about 45% of the total amount
of their financial obligations.

Keywords: Netting, Liquidity Saving mechanism, Network Analysis, Algorithmics

JEL Classification: C02,G39,G29,O31

Suggested Citation

Amato, Massimo and Fatés, Nazim and Gobbi, Lucio, The economics and algorithmics of an integral settlement procedure on B2B networks (September 1, 2021). Available at SSRN: https://ssrn.com/abstract=3915380 or http://dx.doi.org/10.2139/ssrn.3915380

Massimo Amato

Bocconi University - Department of Policy Analysis and Public Management ( email )

Via Roentgen 1
Milan, 20136
Italy

Nazim Fatés

Inria Nancy ( email )

Lucio Gobbi (Contact Author)

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

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