As highlighted in my earlier report, The Business Value of Trust, we face a serious problem today: Established brands are increasingly losing consumer trust. In fact, the lack of transparency when using customer data is the biggest factor causing the erosion of consumer trust. Fortunately, we now have an opportunity to address big industry and societal issues with blockchain technology. Blockchain will help federate the trust between businesses, regulators, and consumers by making the process “consensus-driven,” and increasing transparency through its collaborative consumption model, effectively bridging the ”trust deficit” that governments and institutions face today. Therefore, it is no surprise that 88% of banking and financial executives surveyed in the Asia-Pacific region view blockchain as important or critical to the future of their industry.
Blockchain’s emerging ecosystem pivots around distributed, shared infrastructure; powerful cryptography; and immutable records that threaten to marginalize central authorities such as banks, brokerage houses, and insurance firms. (For a more thorough definition of blockchain, read our e-book “Demystifying Blockchain.”) Blockchain has the potential to automate not just key processes but entire industries, with a multiplicity of enterprise implications in play beyond Bitcoin. Many leaders believe that blockchain will resolve their industry’s longstanding pain points, such as high operating costs, legacy systems, fraud, and poor data management and that the resolution of these issues will ultimately boost efficiency. In fact, by cutting out the middlemen and boosting efficiency, some estimates show that blockchain technology could reduce banks’ infrastructure costs by $15 billion to $20 billion annually through 2022.
As with any major business change or technology cycle, discretion is the better part of valor. Companies have mainly adopted a prototype approach to blockchain and are piloting initiatives to better understand blockchain’s perceived benefits, which include cost savings through improved process efficiencies and the creation of new business opportunities by reinforcing transactional trust between consumers and financial institutions. To find the best way forward, companies are taking a two-pronged approach, which involves investing in startups, forming alliances, and leveraging accelerators, while also setting up blockchain labs with dedicated resources and putting together a blockchain interdisciplinary taskforce.
Embracing blockchain in the still-percolating blockchain world can be daunting. As with any early-stage technology, there’s a substantial learning curve. Blockchain presents new ways of working and a new set of internal and external challenges. Companies need to overcome hurdles ranging from building a business case and handling government regulations, to creating a cultural fit for mainstream adoption and addressing scalability and interoperability challenges.
Blockchain is not the answer to every business problem. Before embarking on a blockchain journey, leaders need to be laser-focused on understanding how blockchain will address existing business problems. This includes creating a roadmap to integrate the technology into the business strategy.
The year 2017 raised the curtain on the new products, business models, ways of working, and trust mechanisms that are headed our way in 2018 and beyond. Just as the Internet upended the way we connect with the world, blockchain will provide a new model of trust. It’s time to find your organization’s digital business identity with blockchain. Leaders that can separate blockchain noise from reality and adopt a flexible strategy for overcoming the inevitable business-technology and cultural challenges that will occur along the way will be best positioned to reap the significant advantages in business value that will last far into the future.
Check out our report to get a glimpse into how financial institutions in the Asia-Pacific region are readying themselves for a future that pivots around blockchain’s distributed ledger technology to power enterprise-grade, transactional applications.