Why blockchain isn't a passing fad for finance execs

Few terms in business today elicit a reaction as strong as the word “blockchain.” When the topic of blockchain comes up in a discussion with finance executives or CFOs, my clients’ reactions span a wide spectrum from “I don’t believe the hype” to “this is going to foundationally transform my business.” And the conversation is not focused on cryptocurrencies, which is only one relatively small use case for the underlying blockchain technology.

The healthy skepticism on the merits of the technology are rooted in the confusion around what blockchain really is. A great place to start is Deloitte’s Tech Trends article, “Blockchain to blockchains: Broad adoption and integration enter the realm of the possible.” Consider this, of blockchain-knowledgeable senior executives surveyed at organizations with $500M+ in annual revenue (cross industries):

• 55% percent said their company would be at a competitive disadvantage if it failed to adopt the technology; 42% believe it will disrupt their industry
• 21% have already brought blockchain into production and another 25% plan to do so within the next year
• Of those that have brought blockchain into production, 28% have already invested $5 million or more, with 10% investing $10 million or more (these investments are taking proof of concepts on a path towards broader adoption)

Enterprises are accelerating the investment of resources and dollars in exploring Blockchain, building many proof of concepts, and beginning to deploy scalable solutions. According to IDC’s inaugural Worldwide Semiannual Blockchain Spending Guide, close to $1 billion was spent on blockchain solutions in 2017; spending is projected to more than double in 2018.

These signposts, among others, are hinting that blockchain is not a passing fad. For finance executives and CFOs, know this:

1. The emerging solutions are real
2. There is potentially significant value to be gained in the business case
3. The accelerating investments in the technology indicate it’s here to stay

The challenges

When I talk to CFOs about their greatest challenges, one of the most common responses revolves around inaccurate or inconsistent data. This drives higher transaction costs and the need for large finance teams to perform data validation and reconciliations. What is a source of this problem?...absence of trust between the trading parties and disparate systems, which results in multiple versions of the truth, varied contractual terms and conditional agreements, slow value transfer, and increased costs to verify.  

The solution

Emerging blockchain solutions ensure data validity at the start of a transaction across trading parties. Secure self-executing contracts that automate value transfer, create a single source of truth, and provide transparency to satisfy governing bodies becomes a reality. Add the fact that data recorded on the blockchain is immutable, the result is accurate and consistent data. You can see where this is going – blockchain can have a substantial impact on the finance function, transforming existing core processes such as order to cash, record to report, and procure to pay.

Specific potential benefits

• Increased, touchless transactions can yield 40%-80% cost savings (based on project experience)
• Decreased transaction cycles from weeks to hours improve working capital and free cashflow
• Embedded controls decrease risk of fraud, as well as the cost of audit and compliance
• Near real-time and consistent data availability improves reporting and business insights

The bottom line

CFOs shouldn’t wait to start learning about, evaluating, and testing the use cases for blockchain in their organizations, as the opportunity to reinvent finance processes, and the business at large, is now.

What do you think? What implications do you see for finance as it relates to blockchain?