Blockchain and its potential in Finance
Blockchain seems to divide people like no other disruptive tool in the market.
Believers in Blockchain promote the opportunities and benefits that may arise with adoption, e.g. think about patient data management and how powerful it would be if your full historical health data could be accessed by the doctor independently of country or health agency?
On the other side, scepticism to Blockhain is increasing with the argument that it is not only costly but that other tools can drive the same change.
The reality is that Blockchain has not reached the masses as expected but pilots and experiments keep popping up in different fields. For example, the increased investment by incumbent banks in the payments space using consortiums (co-partnerships) of Distributed Ledger Technologies.
Put simply, Blockchain is a Distributed Ledger Technology that hosts a growing number of blocks (i.e. records of transactions). Each block is validated and recorded using time stamps. Participants have access to the same exact information and immediately notified if someone tries to change the records.
From Finance perspective, Blockchain has well known potential in the intercompany space. Without a reliable single version of the truth, Finance teams spend significant effort in reconciliation of intercompany transactions, resolution of billing disputes and report creation with the aim to increase visibility.
A blockchain-based solution can offer APIs for integration with existing accounting systems (i.e. requires no alteration to existing system landscape), providing near real time reconciliation, eliminating mismatches and increasing visibility to all participants involved. This solution would result in the following downstream benefits to Finance:
a) support/ reduce the reconciliation process performed by Finance
b) eliminate reporting requirements and dispute resolution
c) provide enhanced control and confidence to external regulators
It should be noted that blockchain is not the only tool that can support the changes above. For example, consider having a fully integrated system across companies/entities or having the current siloed GL landscape on Cloud in which one single version of in and out payments would be possible.
As such, before adopting blockchain to support intercompany process, teams should consider:
a) available tools in the bank/Finance
b) strategic direction of IT/Bank
c) implementation cost of Blockchain vs other solutions
Whichever solution is selected, training and dissemination of Blockchain should be provided to Finance teams to support adoption of a transformation mindset and drive known how of available tools in the market.
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