Blockchain’s potential to offer secure, transparent and accurate transactions – from helping with provenance of grocery products to preventing banking fraud – is making it a strategic force across many industries. However, for those that still may be mulling over adoption, now is the time to take the plunge. The next 12-18 months will be extremely important for companies looking to develop their blockchain strategies and it is vital that they seize the opportunity to ensure they can fully reap its benefits.
Blockchain can transform how transactions occur, are recorded and verified; this can benefit a variety of industries such as healthcare, insurance, retail, property and media. The potential of blockchain in financial services is particularly huge. For banks, the enhanced security provided through cryptography technology and the tamper-proof design is an enormous draw. It can eliminate the risk of a single point of failure, and if a breach were to occur, its location can be quickly and easily determined without impacting the rest of the network. Added to this, with the use of smart contracts, process elements can be codified into programmable instructions and the need for intermediaries removed. This simpler and more efficient infrastructure would enable banks to greatly reduce their costs. It is no wonder that a recent Cognizant study found that 91% of financial services executives believed blockchain would be critical or important to their firm’s future, with 75% predicting that it was set to boost their revenues by more than 5%. It is therefore all the more important that companies start actively exploring the application of blockchain to their business.
Blockchain’s potential is not limited to the financial services sector. Imagine your travel insurance policy being ‘activated’ at the exact moment a cruise ticket is purchased, and ‘de-activated’ when the ship docks at its destination. And if the ship does not depart on time, blockchain-enhanced insurance could automatically trigger the claims process. There are also several use cases across the creative industries. If we look to the world of art, blockchain can help bring transparency to the market and track the sale of artwork as well as the payment of royalties. Creative projects produced on blockchain technology could be recorded upon creation and embedded with smart contracts that contain licensing terms. So, when consumers come to make a purchase, the royalties would flow immediately to each of the participating parties.
More topically, the use of blockchain in the supply chain (and more widely, manufacturing) could have potentially helped to provide a solution for the recent Dutch egg contamination and the salmonella outbreak earlier this month, as well as any other worries surrounding counterfeit goods that might arise. Supply chains are typically complex, with multiple organisations providing a variety of services across many countries. Blockchain can quickly and efficiently provide trust in the identity of any partner in the relationship. It can also act as a registry and inventory for any asset, ranging from raw materials to intellectual property.
While recent research has suggested that only 48% of executives in financial services had a defined blockchain strategy, it is time to move, for companies wishing to utilise the potential of blockchain. Developing a sustainable strategy now could be the difference between gaining an enormous competitive edge, or risk being left behind as the industry moves on without them. That is why we continue to advise our clients to invest in building organisational capability to prepare for the rise of blockchain.
While it is important to build technology capability to explore its potential, to truly derive the promise of blockchain it is more important to understand the right business problems to apply it to. It could take many years to get this right therefore it is important that businesses explore blockchain options now and call on expert help to see how it can fit into their operations, as well as discover and mitigate the challenges that might arise.
To accelerate adoption, they will also need to establish internal blockchain champions, execute proofs of concept to fully understand the impact blockchain could have, and identify opportunities that boost confidence in the technology and show rapid results. This may not be easy to prioritise among various competing initiatives, but the benefits that blockchain can offer are too substantial, and companies cannot afford to wait any longer.
Vivek Daga, Vice President and Head of UK & Ireland Cognizant