Blockchain and corporates: unleashing potential
Distributed ledger technology has moved from a concept to providing real benefits to industries ranging from insurance to diamonds, which were explored in a recent Deutsche Bank webinar
Distribution ledger technology (DLT) and blockchain technologies have moved beyond a concept in recent years, as a growing number of companies recognise that they enable many participants to co-operate in documentation production with changes made safely and fully verified.
Activities such as payments processing have become faster and more efficient, while multinationals such as Unilever and WalMart have been exploring the potential in areas such as the supply chain. As Unilever declares on its website “we are constantly looking at where blockchain could add value to our business”.
In addition, the technology has been deployed in global trade – flow reported on this and the Maersk/IBM innovations in ‘Trade Finance and the blockchain – where are we now?’ (August 2020).
A transformative force
Turning to the recent Deutsche Bank Research report ‘Blockchain and Corporates – Transparency is the New Marketing’ by analyst Marion Laboure (October 2020) this was expanded into a 3 December webinar, which she moderated. As the report notes at the outset: “Like the Internet in the 1990s, DLT and blockchain are set to transform the economy. Yet, two-thirds of senior executives still don’t know what DLT is, and those who do tend to ignore its uses outside of some simple financial applications.”
Blockchain can be accessed via application programming interfaces (APIs) and employed for a broad range of business uses. They include smart contracts, which use computer code to automatically monitor, execute and enforce a legal agreement through contractual clauses and functional outcomes being mapped as code on a blockchain. Resulting benefits range from greater efficiency and security to cost reduction.
Laboure and colleague Benjamin Madjar, Deutsche Bank’s Head of Corporate Cash Management Structuring were joined in the webinar by three individuals who are fully engaged in realising the blockchain’s potential. Representing the insurance and asset management sectors was Bob Crozier, Head of Blockchain and Chief Architect – Customer Platforms for the international financial services group Allianz.
Leanne Kemp is founder and CEO of Everledger, set up in 2015 as “an independent technology company that helps businesses surface and converge asset information” via secure technologies that include artificial intelligence (AI) and the Internet of Things (IoT) in addition to blockchain. These technologies are employed to provide the valuable information contained in “the lifetime story of a diamond, coloured gemstone or fine bottle of wine”.
Klemens Link is Head of Development for Gübelin Gem Lab, a Switzerland-based gemological laboratory founded in 1923 for examining and determining the authenticity of precious stones.
Source: Gübelin Gem Lab
Kemp said that her early career saw her working with track and trace technology in the mid-1990s. Blockchain, although still associated by many people only with bitcoin and other cryptocurrencies, also lends itself well to track and trace activities through using a set of trusted technologies. It has quickly established itself as a valuable tool for addressing challenges within the diamond industry, such as determining the provenance of precious stones and specifically those of ‘blood diamonds’ used to fund anti-government military action.
Link said that Gübelin Gem Lab’s remit as blockchain developed was to harness it in developing technology for the jewellery industry that could provide greater transparency in areas such as the provenance of precious stones. This had begun with physical tracking and has subsequently expanded into more areas as further technologies were developed, such as a digital logbook now used across the industry.
In early 2018, Gübelin Gem Lab and Everledger joined forces in a partnership to create greater transparency by creating the Provenance Proof Blockchain for coloured gemstones. The platform’s blockchain technology utilises the Emerald Paternity Test developed by Gübelin, which uses DNA-based, nano-sized particles encoded with the mine’s information to establish a stone’s origin.
The collaboration, as described at the time of the launch “aimed at combining transparency, integrity and security with the level of privacy and confidentiality required to bring together all stakeholders involved in the lifecycle of a coloured gemstone from mine to end-consumer.” Link said that the initiative had since received an industry-wide launch and is used by around 300 companies.
Benefits for insurers
Asked how insurers are evaluating blockchain, Allianz’s Bob Crozier said that the industry still in the early stages of employing the technology and working towards delivering specific projects and solutions for its customers. In time it would make the automation of various parts of the industry possible.
Blockchain allows step-by-step development by putting various building blocks in place and addressing specific problems, such as track and trace and reconciliation. Increasingly it can be used to focus on value-added use cases.
Allianz successfully trialed blockchain technology in late 2017, for a global captive insurance programme. Commenting on the length of time that it typically takes to develop a blockchain-based initiative from initial conception to launch. Crozier said that the company then carried out a deep study for a blockchain project in 2018, but first had to secure buy-in from senior executives and ensure that a simple, direct and clear message was conveyed. He admitted that setting out a vision and strategy for where blockchain would take Allianz had proved tough at the time.
Allianz Global Corporate & Specialty announced in August 2019 that it is developing a blockchain-based ecosystem to facilitate cross-border insurance payments for its corporate clients.1 Blockchain has “a coherent storyline to tell” said Crozier, although it is likely to take a further two to three years before its initiatives start to generate significant value.
Longer-term, he believes blockchain will be part of a convergence of several technologies and predicts that the central bank digital currencies (CBDCs) now at various stages of development around the world will unlock a further store of value.
Blockchain tooling, which in the early days was little more than “a raw set of protocols” is now relatively mature, according to Kemp, although it is likely to take two or three more years until “killer applications” became available for the diamonds industry. De Beers, developer of Tracr, the first end-to-end diamond industry blockchain platform,2 has spoken of steadily scaling up blockchain processes by 2025 and complete integration into the industry by 2030.
On the specific problems that can be addressed by blockchain, Kemp believes that these vary significantly from industry to industry. The Kimberley Process, set up in 2003 to regulate the trade in rough diamonds, is one example. It has involved global coordination by those in the industry to address the issue and has benefited from the advance of blockchain technology.
However, as Laboure noted, in other sectors such as oil production although it is recognised that blockchain offers a range of benefits such as making trade finance and letters of credit easier and more efficient, the technology has yet to achieve critical mass.
Link spoke of the need for technology development to be matched by specific industry applications. “You need a good, long-term understanding of an industry and its particular problems in order to implement blockchain successfully,” he suggested. This means earning the trust of its main stakeholders, who will take on a new and unfamiliar concept only once they fully understand it. The initial costs also need to be relatively low in order to attract a sufficient critical mass of users,
Kemp acknowledged that there is still much work to be completed in the ongoing process of digital transformation. This requires a coherent data strategy, including a default set of standards on data and data sharing – although this is not a technology problem, but one of human trust. However, she stressed that there are ways of bringing together multiple chains and linking them for data to be exchanged.
For her, the “holy grail” is a future in which people routinely used blockchain-based products oblivious of the fact they are doing so. And for Link, blockchain has the potential to bring efficiencies to the entire supply chain management process as competitors come together through a mutual interest in using it to enjoy the benefits. “DLT technology is the one that adds value,” he concluded.
Deutsche Bank report referenced
- Blockchain and Corporates: Transparency is the New Marketing, October 2020, by Marion Laboure
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