Five uses for blockchain in business
The much-feted blockchain technology can bring business value in many areas, but how can it be adopted in its present form?
Faster adoption is happening in ecosystems with few obstacles to overcome, like regulation and privacy issues, for example. Distributed ledgers can bring trust between parties where little exists, or delivery efficiencies in information flow or value transfers between parties.
We highlight five ways blockchain can be used and how it is currently being deployed.
EY and Guardtime created Insurwave, a product that allows for the dynamic insurance coverage of ships carrying cargo. “If you have a ship going from point A to B and has to change course, the risk profile changes on that ship as it changes course,” said Eli Stern, Principal at EY.
“Through blockchain technology and GPS, the application alerts any stakeholders, it quantifies the change in risk profile and adjusts the change in coverage instantaneously. That can be used in trucking or other transportation.”
With more traditional insurance, claims can potentially be processed faster and more efficiently with the combination of drones and blockchain.
[Damage] claims can then be managed in blockchain and processed faster so that people can begin to rebuild immediately.
During natural disasters like hurricanes that cause significant property damage, drones were used to capture images exceptionally faster than having a person conduct site inspections.
Once damage is assessed, the claims can then be managed in blockchain and processed faster so that people can begin to rebuild immediately. Blockchain would provide transparency between the broker, insurer and reinsurer.
The Blockchain Insurance Industry Initiative (B3i) has already completed its first prototype for property catastrophe Excess-of-Loss (XoL) reinsurance contracts and has already developed common standards for this and other products.
2. Know Your Customer (KYC) and Other Background Checks
A background check occurs every time a bank onboards a new customer or an existing customer buys a product from a bank.
“If a consortium of banks come together and they’ve done a KYC, it can reside on blockchain – when I go to another bank, I can authorize that bank to access that KYC,” said Bhooma Chutani, head of the Blockchain and Distributed Ledger Technologies practice at LTI.
“What is on the blockchain is true and authentic instead of going through the KYC again.” Regulations would need to change for this use case though.
This same use case works when different market participants need the same background check. If the information required for new hires, like employment records, education degrees and criminal records, for example, was on blockchain, recruiting would be smoother and faster.
3. Loan Originations and Securitization
Use cases for blockchain provide tremendous value for securitization, particularly with data integrity, and investor and regulatory reporting.
Securitizing assets requires extensive due diligence whereby data tapes containing detailed information on the underlying assets are reviewed.
By putting the securitization on blockchain, there would be no need for due diligence, especially if the underlying loans were also originated on blockchain.
Originating an asset like a mortgage on blockchain would be more efficient. Information on the borrower and property records, including the title and any liens, can be stored and tracked. Once the loan is originated, payment information can be uploaded to the distributed ledger.
Investors holding tokens, or digital bonds, would be able to view loan performance in real time on the blockchain. “If people are paying loans back on blockchain, the lag between payment to bondholders would be eliminated because loan holders make their payment and it flows directly to the bondholders – it’s very future state,” said Eli.
4. Supply Chain Management
Blockchain technology can track items that travel through a supply chain. “If you tag something and represent it on the blockchain, everyone can see where it’s going,” said Eli.
Within the wine industry, blockchain can help provide information about the underlying grapes from harvest to bottle.
“Consumers can see – through a barcode – the history of the grape and the wine to mitigate counterfeit wines,” said Eli.
“This helps consumers to see how their wine has been created from the first grape that was picked to the bottle.”
Broader applications in agriculture exist as well. To track food from the field as it’s washed, cleaned, processed and packaged before landing on shelves, companies use blockchain to track progress.
Some grocers utilized the technology to identify where and when an item was harvested, which helps with food recalls.
For healthcare products, or any regulated product, blockchain works to provide better inventory management.
By putting [the supply chain] on blockchain, every participant has end-to-end visibility, and everyone can see where the shipment is
For a company importing raw agricultural materials the farmer picks up the material, the lab checks the quality, and then the product is transported to the port where an expediter loads it on a ship.
After a week, an expeditor will unload the product from the ship, a government lab checks the quality, and then it lands at a warehouse.
Since many entities touch the supply chain over a few weeks during this manual process, companies overspend and can hold too much inventory because an item’s precise whereabouts are unknown.
“By putting it on blockchain, every participant has end-to-end visibility, and everyone can see where the shipment is,” said Bhooma.
“They can track the lot of that raw material from the farmer to the warehouse. Now that they have better planning and they’ve reduced the amount of raw material that they need, they’ve reduced the amount of inventory they need to maintain at hand.”
5. Consumption-Based Payments
Blockchain solutions track usage for rights and royalty payments, and can also be used to provide benefits to consumers within the insurance industry, where certain activities affect premiums.
Having variable pricing for health insurance policies could work to lower payments in certain scenarios, for example, those who strive to maintain a healthy lifestyle.
Blockchain could automatically price the [insurance] premium according to a set of rules in the background.
“If you integrate your wearables, you could link that to a smart contract in the background and every month, that could vary your premium,” said Bhooma.
This same concept can be applied to car insurance premiums. Privacy issues notwithstanding, installing telematic devices in cars would allow insurance companies to provide discounts to good drivers, who then pay on how much, and how well they drive.
“Blockchain could automatically price the premium according to a set of rules in the background,” said Bhooma.
About the author
Andrea Murad is a New York–based writer. Having worked on both Wall Street and Main Street, she now pursues her passion for words. She covers business and finance, and her work can be found on BBC Capital, Consumers Digest, Entrepreneur.com, FOXBusiness.com, Global Finance and InstitutionalInvestor.com.