Blockchain and other distributed ledger technologies have the potential to disrupt the way business transactions are conducted.
It is often spoken synonymously with cryptocurrency initiatives, such as Bitcoin, but that is only one of many implementations for the underlying technology known as Blockchain.
Blockchain is a distributed database record of transactions between businesses, effectively removing middlemen. Transactions on a Blockchain are recorded once the participating parties come to a consensus. Once recorded, the transactions cannot be repudiated.
The financial services industry has been an early adopter of this technology, from trade finance to remittances. Some banks in Europe already use blockchain technology for their KYC and cross-border payments. And it doesn’t stop there.
The highly transactional and often multi-step nature of business process services means that the potential applications for Blockchain technology in business and government — well beyond financial services — are seemingly endless.
Blockchain technology can be applied to any multi-party transaction where trust, traceability and transparency (the 3 Ts) are required.
By managing the steps and relationships across an entire stream of interactions, Blockchain promises to drastically transform digitized business processes—making them more efficient, more agile, more secure, less costly, and more transparent, while eliminating many intermediaries and increasing productivity.
It’s no longer a question of whether Blockchain systems will disrupt how organizations transfer and ensure value with one another. The focus today is how and when.
Business Process service providers are convinced that distributed ledger technologies can address a number of pain points for organisations struggling with inter-organizational data sharing.
The emergence of Blockchain also led various service providers to further investigate the nature of how commercial agreements are created, modified and delivered. Here’s a look at some interesting examples of the applications for Blockchain technology:
Smart contracts and transformation of B2B supply chains
A defining feature of Blockchain is the Smart Contract. These are self-executing business rules that determine how two parties transact on a Blockchain.
B2B industrial supply chains are ripe for innovation using Blockchain-based smart contracts. These contracts automatically and dynamically execute the company’s procure-to-pay process from end-to-end.
In other words, the contract itself takes care of purchase orders; it knows the precise number of units required, at what time, and where; and it secures the best pricing from the best supplier.
What’s more, automatic matches with purchase orders, goods receipts and invoices on the blockchain ensure that there are no disputes due to manual errors and missing documents.
Solutions like these, which do away with multiple intermediaries—financial intermediaries, internal approvers, purchasing agents, goods-verifiers and so on—are why Blockchain sometimes gets referred to as a “disintermediating technology.” The result is a much faster process with complete transparency at each stage of the transaction.
How a shared single source of truth can reduce fraud in Claims Management
One area where Blockchain implementation will strengthen the B2C space is in claims management—whether medical claims, auto insurance claims, life insurance claims or other types of claims.
Today, claims processing is a notoriously lengthy and complicated process, requiring verification from multiple intermediaries before a payment can be made to the claimant. Fraudulent claims are estimated to cost over Rs 10,000 crore annually to the industry.
Companies have invested in advanced analytics to identify fraudulent claims and patterns, which are more often caught after the claims have been paid.
But what if we were able to capture fraud on a more real-time basis? Take medical claims for example. A Blockchain platform can bring hospitals, insurers and claimants on to the same claim data, reducing possibilities of claim manipulation and improving transparency amongst the participants.
A smart contract implementation automatically and securely completes all the steps involved—from automating coverage verification to claims validation. In this example, Blockchain acts as the single, secure, shared repository of claimant information, reducing fraud and duplicate claims. Suddenly, the process is quicker, more secure and less costly.
A secure immutable ledger for Mortgage Processing
The home loan market is fragmented with the involvement of real estate agents, lawyers, government organizations, lenders, underwriters and other potential intermediaries. It is still paper-intensive, manual and error-prone — and getting a home loan continues to be a long, drawn-out process.
Blockchain technology brings about efficient collaboration among the different parties, paving the way for secure and faster disbursals.
At its core, Blockchain acts as a secure, immutable recordkeeper of mortgage transactions throughout the loan application process. For instance, a home loan applicant can upload his/her application via a bank portal and authorize the bank to verify the details using a secure key.
Using the secure key, the bank verifies salary details, credit information and tax statements through data sharing with the relevant organizations on the network. Once verified, the applicant securely signs the loan document via the private key and receives the loan proceeds.
For banks, asset transfers are tracked even while regulatory compliance is monitored, providing transparency on title ownership. This enables faster mortgage securitization and real-time payments.
Blockchain for parking solutions
While many companies are working on the introduction of advanced sensors capable of detecting cars and automatically reading their license plates, introducing smart contracts to the process enables authorities to automatically deduct parking charges from citizens using either digital parking wallets or credit cards linked to their identity.
The implications of such a model for parking payments are huge: 100% compliance, payment accuracy, no manual patrolling, automatic computation of occupancy ratios, and zero waiting time.
Blockchain’s impact on the public sector
Since geospatial strategy remains one of the greatest challenges faced by Indian public sector because of inadequate data sharing with government and law-enforcement agencies, a Blockchain network could be the answer to facilitate data sharing in a permissioned, distributed, and secure manner across organizations.
The Indian government’s efforts toward building a unified network via the IndiaChain project is a step towards this vision.
As public and private sector adoption for Blockchain grows, the next foreseeable wave of implementation will focus on combining such distributed ledgers with solutions that leverage AI and machine learning.
With increased focus on data protection laws (such as envisaged by GDPR laws in Europe) to collect, maintain and destroy data responsibly, the need for Blockchain-based solutions will only increase.
To be sure, Blockchain is the next technology with paradigm-shifting potential. But those organizations that mobilize early—and select the right partners in their ecosystem—will be in the best position to test out prototypes and ultimately reap the benefits of innovation.