At the World Economic Forum it was revealed that by 2025, 10% of global GDP will be stored on blockchain or blockchain-related technology. In short, blockchain is set to revolutionise transactions and business operations forever, writes Jason Mitchell, partner and head of technology at MHA MacIntyre Hudson.
These developments have the potential to reshape entire industries, particularly financial and professional services. Businesses need to understand how they will be affected in the medium and long term, and possibly even in the near future.
There is a split in opinion on whether blockchain will replace the key processes in banking, financial reporting and auditing, or just result in an add-on to existing systems. In a nutshell, the proposition is that services such as financial transaction processing, accounting and audit could be largely standardised via companies writing their transactions directly into a joint register, which is then distributed, cryptographically wrapped and automatically verified. This would replace the need for third party verification of base data, and allow auditors to concentrate on areas where they can add more value, such as complex transactions, judgement areas and interpretation of trends in data.
If we add in processes that could be developed further using artificial intelligence, any review of financial reporting using these tools could end up being a very high level analysis of exception reports, interpreting trends and patterns. As a firm we are trialling an analytical tool that will help us automate transactional work, and introduce additional checks and balances to monitor for fraud risks . The software will provide us with a more efficient and effective approach to routine work but most importantly, it will provide insight into business performance through KPIs and benchmarking data.
The counter argument to all of this is a cynicism over the old classic style of ‘garbage in – garbage out’. The information may be verifiable, but what if it’s entered incorrectly in the first place? It’s likely human interpretation will be required at a much more basic level than just the final analysis.
Blockchain has applications anywhere where decentralised ledgers is beneficial but the technology is not just potentially useful in these areas. It could also be relevant to Know Your Customer, anti-money laundering, smart contracts, supply chain management; the list goes on…
Although the technology has so far been largely adopted by banking and financial services, new pilots from the energy sector, retail, supply-chain and construction are pushing it further into the spotlight. In the medium term we will also see blockchain disrupt and decentralise cloud storage, track and manage your digital identity –reducing fraudulent activity – and supporting digital voting. Imagine not having to trudge down to your local school in the rain to cast your vote, not to mention having complete confidence in a transparent democratic process free of possible fraud?
It’s still staggering to look back at blockchain’s origins and its rise to prominence given that not so long ago it was a little-known basement project. Today, people from all walks of life are getting involved in either buying cryptocurrency or supporting various blockchain projects (Bitcoin, Ethereum, Siacoin and others) aimed at disrupting old, centralised industries.
But Blockchain is far from being a finished product – it has a great potential to improve internal business operations and external transactions, which makes it difficult to ignore. Businesses need to understand how to adapt to the inevitable changes that are about to occur, and to identify where human input is still required.