Benefits of blockchain for businesses: Part two
In the second of a two-part feature we look at the benefits of using blockchain technology in business.
If you only have 30 seconds:
- One of the main benefits of blockchain for business is tackling and preventing fraud
- Blockchain technology can also be used by organisations to boost transparency and traceability
- Blockchain can help firms reduce costs by eliminating the need for intermediaries
Be sure to read the first instalment of this two-part blog where we explain what blockchain technology is, how it works, and clear up some common misconceptions about it.
You can also read more on the topic in another of our previous blogs, 10 unexpected blockchain facts.
If you’ve read the first instalment of this two-part feature, you’ll be familiar with what blockchain is and how it works. In this second part, we’ll take a closer look at the business benefits of the technology.
In short, blockchain can reduce risk in businesses by increasing transparency, and also cut costs by removing third parties from asset management and transactional processes. This means blockchain technology can be transformative for industries that process huge volumes of real-time transactions, such as programmatic advertising, financial services, commodities trading, manufacturing and retail, to name just a few.
Below, we’ve highlighted multi-sector examples which illustrate the benefits of blockchain, to help you to decide whether it’s right for your organisation.
Blockchain business benefit 1: Tackling fraud
Blockchain’s decentralised nature means you don’t need to trust a central actor in order to trust the ledger; you instead trust the majority power of the participants in the blockchain network. Blockchain is immutable and auditable, so no one can change the past without the majority of participants in the network agreeing, effectively providing built-in fraud prevention by default.
Organisations of all types can find blockchain an effective method for preventing fraud. Whether businesses are struggling with financial, supply chain or identity fraud, blockchain has the potential to eliminate the avenues that fraudsters typically exploit.
As the Blockchain Council reports, common fraudster tactics include altering or deleting information in a company’s accounting systems, or changing electronic or paper documents to create fraudulent files. This can be addressed with blockchain technology, especially if using permissioned networks which restrict who is allowed to participate and to what degree.
While we’ve seen several examples of blockchain being used to help fight fraud in financial markets, such as Chile’s Santiago Securities Exchange, it’s also now being used to fight digital advertising fraud. A blockchain-based certification solution developed by Telefónica Tech has been integrated into Adwatch to increase the trust and credibility of its metrics with independent, irrefutable digital evidence that can be used in court.
Blockchain business benefit 2: Boosting transparency and traceability
Blockchain networks are inherently transparent and traceable, making them ideal for businesses that depend upon an airtight and easily audited digital paper trail.
Financial institutions are among those leading the way with their use of blockchain to increase transparency and traceability. Barclays Bank, for example, is using it for tracking transactions, enforcing compliance, and to combat fraud. It has also explored the use of smart contracts to standardise post-trade processes, as well as deploying blockchain to connect trade finance partners and for syndicated lending in a transparent manner.
Through its transparent nature, blockchain also has the potential to ensure companies act in a sustainable way. The use of cobalt in lithium-ion batteries has caused worldwide concern, with as much as 15% of it mined in environmentally-damaging ways by people working in poor conditions. IBM and RCS Global Group have developed the Responsible Sourcing Blockchain Network (RSBN), so manufacturers of electric vehicles, smartphones and laptops can use it to check the origin of the cobalt they use, certain that the information is trustworthy. Walmart also uses blockchain to track and verify the supply of some vegetables, creating a platform that can be updated using Microsoft Excel so small suppliers that don’t have advanced IT systems can use it.
Retailers and consumer goods firms can monitor their supply chain relationships, while consumers can verify the product provenance claims of merchandisers fostering closer relationships between brands and customers.
For example, Starbucks is using blockchain technology to allow consumers to scan packaging and find out the journey of the coffee beans in the product, and the company’s new Starbucks Odyssey loyalty scheme is built on blockchain to facilitate tradeable rewards via NFTs.
Blockchain business benefit 3: Reducing costs
Blockchain can help cut costs by streamlining manual tasks and time consuming processes such as aggregating and amending data, in addition to easing reporting and auditing work.
For example, in April 2020 blockchain infrastructure was created to support the previously complex reconciliation process for interbank transactions in Italy. Lack of standardised process and fragmented communication meant reversing mismatches was very labour intensive, something blockchain helped automate.
The technology has also been used as a way to help reduce the cost of cross-border payments and remittances. Banco Santander’s blockchain-based money transfer service – launched in 2018 – reduces the number of intermediaries required in these transactions, leading to greater efficiencies and cost savings.
In digital advertising, blockchain provides agencies and brands with greater visibility on the pathway between campaign, click, and purchase. With increased transparency, advertisers can better optimise ad buying to maximise ROI. For example, Toyota’s blockchain-based partnership with advertising analytics firm Lucidity enabled the car manufacturer to optimise ad spend and drive a 21% lift in performance.
Is blockchain right for your organisation?
Before adopting blockchain technology in your organisation, you’ll need to be sure there is a genuine business reason for doing so. New technologies won’t solve existing problems or streamline operations on their own – they need to be used in the right way.
While the goal of driving efficiency is one that all organisations would want to work towards, it’s important to consider that using blockchain will fundamentally change many processes too. For example, suppliers and partner organisations will need to be prepared to adapt to new working practices. There will be a number of stakeholders inside and outside the business that will need to be consulted. Furthermore, you’ll need to be sure that using blockchain for your purposes doesn’t conflict with any regulatory legislation.
The utopian vision for blockchain in business is decentralising relationships, stripping out layers of intermediaries, and making transactions and interactions faster, cheaper, easier, and more transparent. However, realising these benefits will require a carefully-planned implementation programme based on an in-depth cost-benefit analysis.
Organisations are only starting to realise the advantages of blockchain – as well as some of the potential obstacles – but if it is something your business is yet to explore, we hope these examples provide some useful insight and inspiration.
Expect to see many more developments in this fast moving space, which we’ll be covering in our blog – so stay tuned.
And if you need an explanation of what blockchain technology is, how it works, and clarification on some common misconceptions about blockchain, be sure to check out the first instalment of this two-part blog.