What is blockchain?
Blockchain as a technology and concept continues to be hyped in the financial services industry. Experimental approaches and practical innovations like Accenture’s redactable blockchain are emerging and are of great interest and appeal to the financial sector. As a disruptive technology platform, blockchain is impactful with the potential to redefine the operations and economics of the financial services industry and evolve participants’ business models.
In our view, blockchain technology’s strengths are well-demonstrated in supporting objective, distributed, evenly balanced control in situations where this is difficult to secure, such as international payments. It also provides transparency in vital areas like anti-money laundering (AML) and can help add efficiency, trust and reach to global financial markets where current processes are challenged in their ability to handle the volume and velocity of data to be assessed in day-to-day operations.
Another area of focus for banks and where this disruptive technology and its capabilities could become game changers is in the Procure-to-Pay (PTP) area. Procure-to-Pay brings together an array of third-party stakeholders such as vendors, buyers, business intermediaries and financial institutions playing various roles across countries, legislations and systems without a dominant centralized framework.
Could blockchain make a difference when applied to PTP processes?
We believe yes, since Procure-to-Pay processes align well with blockchain’s operational capabilities. As a technology solution, blockchain delivers important and significant operational benefits to users when:
- Transactions involve finite or countable resources: Procure-to-Pay processes move finite and countable assets, making them ideal for being managed using blockchain logic.
- Complex steps need to be tracked: Like in the case of Procure-to-Pay, which often involves multiple steps; asset movements executed by the different participants; the use of a single digital ledger rather than a series of proprietary systems; and organizations exchanging information.
- Cryptographic audit trail is critical: By their nature, blockchains create trust and help reach consensus on the execution of the different steps of the process, identifying failures and situations of fraud. This is critical for a business where “trust to pay” and “trust in delivery” are key.
- Fragmented offerings with no accepted standard authority: Current market solutions are based upon fragmented offerings, with no widely accepted standard authority. Service providers exist but have been unable to convince participants to leave their current legacy processes and systems to join them for reasons of independence, trust and transformation costs.
Challenges around a Procure-to-Pay blockchain often arise from participants’ concerns over the technology’s ability to handle procurement standards with strong legal codification. Such a situation would result in evolving and disparate requirements across the globe.
Yet, the resulting blockchain benefits would be tremendous as participants could enjoy a consistent and secure framework for covering and tracking the value chain. The blockchain would help encourage trust among participants for payment settlement services available through critical asset exchange and payment functions.
How to kick off your PTP blockchain?
At Accenture, we promote co-innovation and encourage our clients to use technology to address key business challenges, such as Procure-to-Pay. As every client has different processes, organizations and businesses, there is not a one-answer-fits-all solution, particularly where new technology is involved. Co-innovation allows us to rapidly prototype market-ready solutions in fast cycles and in targeted areas. We have found that our co-innovation approach brings to life the benefits in emerging areas such as Procure-to-Pay and blockchain.
And while we are focused on client innovation, we are also looking at ways to build blockchain’s industry utility.
Working with leading academics, Accenture has developed a new capability that will give administrators of private (“permissioned”) blockchain systems the ability, in extenuating circumstances, to correct or remove data from blocks without breaking the subsequent chain. Our invention preserves the fundamental value of permissioned blockchains, while making them more practical for enterprise use in financial services and other industries.
As blockchain technology continues to gain wider adoption within the financial services sector, it will also continue to evolve to meet the specific, practical needs of financial institutions, exchanges, market participants, regulators and legislators.
An industry approach that leverages the technology’s inherent strength while refining key aspects to make it more useful is important.
For more information, see “How Blockchain can bring Greater Value to Procure-to-Pay Processes” on SlideShare.