Blockchain technology already plays a crucial role in the financial services sector. Now interest from other industries is on the rise.
Originally created as the technology to support digital currency 'bitcoin', blockchain has been seized upon by the financial services sector, where it is playing a crucial role in tracking and authenticating transactions.
In 2015, it was revealed that nine of the largest investment banks in the world, including Goldman Sachs, JP Morgan and Credit Suisse, were exploring common standards for blockchain technology in an effort to broaden its use across the sector. Swathes of financial businesses, including three insurers and Toyota Financial Services, have since joined them, forming a consortium of 45 businesses focused on the research and development of blockchain usage in the financial system.
Meanwhile, Simon Taylor, vice president of blockchain R&D at Barclays, has described the technology's ability to provide a continuously growing list of records, secure from tampering and revision, as “a fabric for financial services – a book and records for the world.”
The financial sector clearly sees opportunity in the adoption of blockchain. And a recent survey by Greenwich Associates suggests it is yet to peak, with an estimated US$1 billion being invested by the financial and technology markets in 2016.
How other sectors are embracing blockchain
Of course, if financial services businesses can find advantages from the adoption of blockchain technology, then you may well be wondering what it can offer other sectors. Some examples are already beginning to emerge.
Insurance is one area of financial services where blockchain is an obvious fit. The sector is employing blockchain technology when registering luxury assets to help prevent theft and fraud. One project, which involves Interpol, insurers and diamond distributors, is working to stem the flow of ‘blood diamonds’ into the precious-stones market. Blockchain provides what is hoped will be a tamper-proof record of the provenance of diamonds.
In the health sector, blockchain is being considered as a solution to the counterfeiting of drugs. The creation of a decentralised database of medical records, which would give patients more control over their personal data, is also being explored.
These examples clearly show the benefit to industries and sectors. But can blockchain help businesses directly deliver a benefit to their customers – enhancing the customer experience, improving loyalty and, ultimately, driving profits?
One start-up energy-supply business in Australia certainly believes so. PowerLedgerhas adopted a blockchain-secure ledger to empower residents on the country’s West Coast, which has 300-plus days of sunshine every year, to trade excess energy generated by their solar panels. They will be able to buy, sell or swap excess solar energy with anyone connected to the Western Power network.
The business’s co-founder, Jemma Green, believes consumers “want to take control of their energy generation and consumption”, rather than simply selling it back to energy providers. And blockchain, she believes, is the technology to deliver that service. “We want to show that this tech is so simple to use that anyone can use it,” she said at the company’s launch earlier this year.
How to assess the value of blockchain to your business
While the hype around blockchain may suggest it can be applied to any business, it isn’t always a suitable solution. So how do you ensure it is a viable option for your business and that it can truly add competitive advantage? And how do you implement it?
These considerations can be broken down into three key stages:
The training stage is about obtaining hands-on experience of how blockchain works, where it can be applied and how to leverage it, often through case histories.
2. Diagnosis of the business case
Diagnosis of the cost and benefits of using blockchain, in the context of a business case, is also vital – not least because adopting new technologies will likely involve the replacing of a legacy system or generating a new business model.
The development stage will require you to understand which is the right solution for you. Right now, there are no one-off ‘plug-and-play’ products on the market, so every solution must be tailor-made.
Of course, this process is not straightforward and you will likely face many challenges along the way. Implementing a change programme of this magnitude is time-consuming. With blockchain, once a protocol is developed, you must be prepared to go back and forth to fine tune the product. And because blockchain as a concept is still evolving, new advances are emerging all the time.
There are other industry-related challenges to consider too, such as sector-specific laws and government regulations. For industry-wide projects, it’s always best to bring in the regulators from the beginning. Although interest from early adopters such as China, Estonia, India, Singapore and the UK is particularly strong, many governments and regulators aren’t ready for blockchain and in those cases we have to find a solution without them.
All of this means collaboration with experts and a willingness to ‘test and adapt’ is a must.
Blockchain will create huge disruption in many sectors and, potentially, see some firms leave the market. But by bringing in the right expertise and adopting a collaborative approach, it might also be the technology that will help you to steal a march on your competitors.