Many promises on the Blockchain are highlighted when this technology is mentioned. Taking the big picture and examining how this technology works helps us better understand the issues.
In its most basic definition, Blockchain is a computer file used to store information. While all other computer files exist on a single digital storage medium, Blockchain behaves differently. It follows three simple principles:
• The Blockchain is “distributed”, the file is duplicated in its entirety on many computers. Consequently, no organization or State can control the content of Blockchains. Only the consensus of the entire network storing distinct but identical versions of the initial Blockchain can allow its modification.
• Cryptography, this means that the information that makes up the Blockchain is encoded.
• Finally, Blockchains are designed to be public. People with access to the network can then check the correct consistency of the Blockchain data.
The promise of this technology for the world of finance is to drastically reduce the “cost of trust” thanks to a decentralized approach to accounting and by extension, the creation of a new structure for economic organizations.
The Blockchain: a 360° turn?
Blockchain has the ability to profoundly and rapidly change corporate finance.
Files being replicated as many times as there are people on the network, this creates a dense mesh of nodes. Each authorized person can access in real time all the modifications made to the Blockchain, this ensures real security and traceability of transactions.
The main benefit is a phenomenal time saving. The Blockchain allows companies to free themselves from the time currently dedicated to securing the exchange of their data between the various systems. It also ensures that there is no loss or misunderstanding in the flow of data, internal to the company or coming from third-party systems.
The possibility of sharing verified and reliable data within an organization or an external network (in real time) opens up real possibilities for modifying processes within a company: processes in transactions, business, IT or in the commercial field…
However, a certain warning should be given to the various players in the sector: if they underestimate or prepare in a haphazard way for this new technology, they risk “missing the Blockchain wave”.
Global spending on Blockchain solutions doubled in 2018 to $2.1 billion. Experts predict a growth rate of 80% per year in the coming years, and spending of just over 9 billion in 2021.
For the moment, most companies carry out an internal watch which could facilitate communication and the sharing of information between the various entities of the company. However, it should be kept in mind that the long-term objective of companies is to establish a Blockchain network with all their external business partners, with the aim of gaining speed, simplification and security in all their process.
Among the applications in perspective, a Blockchain network to manage a company’s 90-day invoices would be particularly attractive. This would create a completely transparent market, with a very high level of confidence and very little “risk” for the various members of the market. Blockchain has the potential to leverage all data from various ERPs, to facilitate the transfer of money between organizations without the tedious back and forth with a third-party financial company.
Building good foundations
The Blockchain is still in its infancy, it is now a question of starting to build the foundations to be able to integrate this technology into the various internal systems. It is necessary to be able to link the Blockchain to financial, inventory, invoicing, logistics systems, and many others.
The cloud may prove to be one of the solutions to be deployed to facilitate the integration of the Blockchain. The computing power, storage and versatility of the cloud can allow a smooth transition to be able to integrate the Blockchain.
Finance will have to restructure and adapt around this new technology. For example, contactless transactions will multiply in a phenomenal way in the next few years, with the Blockchain we would no longer need creditor or customer accounts if it is possible to obtain the original data.
So are you ready for this big change?