A recent $20 million funding round, spearheaded by Galaxy Ventures, aims to transform the $6 trillion asset-backed finance market by harnessing blockchain technology to streamline back-end operations. Fence, the recipient of this investment, is developing software to manage the operational aspects of structured credit deals, an area often plagued by fragmentation and reliance on outdated methods such as spreadsheets, PDFs, and email. This setup can impede transaction speed and limit investor visibility into the assets backing their investments.
Fence seeks to replace these antiquated processes with a unified system that provides real-time data updates, enabling lenders to continuously monitor loan performance and cash flows, rather than relying on periodic reports. According to Juan Montero, Fence's co-founder and CEO, this approach can significantly reduce costs for major asset managers. In collaborations with BBVA, a prominent Spanish bank overseeing $800 billion in assets, Fence has reportedly lowered funding costs for borrowers and decreased operational workload while tracking large volumes of loans.
The company utilizes blockchain as a back-end solution, rather than a front-end product, employing smart contracts to manage cash, collateral, and deal terms without promoting tokens or crypto wallets to banks and asset managers. By leveraging APIs, software checks, and smart contracts, Fence can expedite the release of cash when deal terms are met, a process that typically takes days.
Additionally, the company can tokenize lender positions in financing vehicles and, in some cases, the underlying loans or invoices, facilitating the transfer of positions, borrowing against them, or automatic payment upon ownership changes. However, tokenization is only employed where it adds value.
With this funding, Fence plans to expand its presence in the U.S. and enhance its product, driven by the conviction that faster data processing and reduced manual steps can fundamentally reshape the credit market's operations.