Published on December 20, 2017
The rise of Blockchain, as a new buzzword for disruption, has many people asking, “Is this simply a solution looking for a problem?” So I ask them, “Was the Internet a solution looking for a problem?” Or was it actually an entire paradigm shift that completely disrupted business and society?
Nowhere is this more apparent than in the banking and financial industry. Right now cryptocurrencies are gaining incredible momentum, yet that’s not the whole story. The most exciting aspect of Blockchain technology for banking and finance is its ability to unleash the revenue drivers for both top-line and bottom line growth.
As Blockchain initiatives roll out around the globe, there are three cases in particular I would like to highlight. Each case has its own particular origination and advantages, but what they all have in common is the desire to increase economic performance.
The first is Digital Trade Chain (DTC), the brainchild of Belgian banking group KBC 1. Bringing together seven of the largest lenders in Europe, this consortium asked IBM to help build a Blockchain-based trade finance platform.
Targeted at small and medium-sized enterprises, the DTC platform allows cross-border transactions to be tracked online by all stakeholders in a transparent manner. This ensures trust between trading partners and not only makes doing business easier, it also increases the likelihood that even more business will get done.
The next example of Blockchain innovation has to do with KYC. KYC is of course ‘Know Your Customer’, a crucial yet burdensome process that banks and financial institutions must undertake when on-boarding new clients.
In the past KYC took up entire floors in a bank’s office building. Even today, the KYC process is time consuming and labor intensive. Each case requires reams of paper and many man hours of research. But not anymore.
Working with the Monetary Authority of Singapore, local and international banks and financial institutions, IBM has successfully completed a Proof of Concept for a shared KYC Blockchain 2. Moving quickly into Phase II, this project promises to revolutionise how banks store and share information.
Finally, the third example of Blockchain innovation is from Thailand. KBank, one of Thailand’s largest banks, has recently announced the launch of a new enterprise Letter of Guarantee network based on IBM Blockchain.
With the goal of improving the customer experience, the new solution is designed to help simplify and expedite procedures for KBank’s Letter of Guarantee process. With a network validated in real time by every participant, forgeries are now a thing of the past. And what used to take days to verify, now takes seconds.
By now you can see how Blockchain can drive growth. Top line sales will benefit through easier and more transparent business transactions, while bottom line costs are curtailed through more efficient and secure processes.
So what’s next? As Blockchain continues to disrupt traditional industries such as banking and trade, there is one area that I believe will gain traction in the near future – Customer Relationship Management, in particular loyalty programs.
Right now, loyalty marketers are struggling. Their programs often include incentives such as ‘points’ that customers earn for purchases and can redeem for free benefits. But often the choices provided to customers for redemption are limited. These points then grow.
As unredeemed points accrue, revenues must be off-set, which leads to massive balance-sheet liabilities. This means profits are taking a hit, leading some of the biggest loyalty marketers to question the sustainability of their programs.
But Blockchain offers a solution. Now partners can be quickly and seamlessly added to these loyalty programs, while ensuring total transparency and complete security. As more partners join the loyalty network, members will have more choice in how to spend points.
Taken a step further, this could even lead to corporate ‘digital currencies’, where businesses create value by the strength of their partnerships. Why should I use my credit card and get charged interest, when I can use my loyalty points? This will have a massive impact on revenue and profitability as companies create their own private ecosystems.
What do you think about these changes?
Click the below video to understand from a panel of experts the real vs hype on Blockchain like shared KYC, blue audit, interbank payment system along with few use cases.