If you’re still wondering what’s the big deal with blockchain, think of it like this: if you are a medical patient, it will allow you to share your electronic medical records with health researchers or pharmaceutical companies for a controlled period, such as during the course of treatment or the length of a drug trial.
Or, in a blockchain-based insurance market, insurers, haulers, and producers could share criteria such as risk, route, weather, and vehicle type to negotiate transportation coverage.
Consumers could use blockchain to manage fractional ownership in autonomous cars. If applied to the voting process, constituents could cast votes via smartphone, tablet, or computer, resulting in immediately verifiable results. In healthcare, patients could share encrypted health information with multiple providers without the risk of privacy breaches.
Today, businesses of all sizes feel the pressure to innovate. When you’re a large organization, digital transformation isn’t as agonizing as it is for small and medium sized businesses (SMBs). While companies of all sizes want to be cost-effective, this is easier for bigger players in the market whose deeper pockets allow them to spend on technology upgrades and not fear the slightest hiccups. It doesn’t take a genius to see that innovation can give companies of any size a competitive advantage, and SMBs want to keep up with larger competitors. Their challenge is to do so even though they have fewer resources at their disposal.
The correlation between growth and innovation is pronounced in the SMB sector. According to a global study by IDC and commissioned by SAP, 40% of fast-growing SMBs consider innovation one of their top priorities, compared to fewer than 30% of slower growth SMBs. One innovative technology that can deliver transformative change for an SMB is blockchain, which is quickly moving from niche technology to mainstream application.
Cut out the middleman
A blockchain is a digital ledger of transactions shared across a distributed network. The transactions are stored in “blocks” of information that are linked together through cryptography to create the blockchain. Each account and user on the network is validated and given specific security parameters that they may work within. These parameters (set and verified by algorithms) allow users to access information within the ledger securely and without the need for central oversight. So what does that mean for SMBs? First, it can cut out the middlemen of banks and other financial service providers for transactions, especially important for costly international fees. Second, it produces increased transparency, accurate tracking, and a permanent, secure leger.
Blockchain offers a built-in mechanism for trust, combined with finality of transactions for improved processes. Transactions can be run and approved automatically in seconds or minutes, reducing costs and boosting efficiency. Once a block of data records on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network run algorithms to evaluate and verify the proposed transaction.
No international business fees
Blockchain is a positive disruptive force. SAP collaborated with ATB Financial and Ripple Labs to make the world’s first blockchain transfer from Canada to Germany. For SMBs that do cross-border business, this approach could soon offer an alternative to the hefty fees associated with international wire transfers. The ability to circumvent a major bank or financial exchange provider with blockchain leads to an immediate increase in efficiency. It eliminates the correspondent bank’s financial-exchange conversion process, with the currency exchange occurring in real-time, and money is converted and deposited into the beneficiary account quickly and without any extra deductions or fees.
Blockchain is still an emerging technology with many R&D centers working on new possibilities and innovative uses for the technology. Nevertheless, early indicators suggest that SMBs armed with blockchain can take greater control of their financial independence – and that’s just the beginning. We are not yet in the era of blockchain, but we are getting ever closer. It has come a long way since its first implementation in 2009, and for SMBs it represents the next link in the innovation chain.
For more about blockchain’s growing influence, see Blockchain: A Better Future For Banking.Comments