How is the technology revolution that’s barreling toward us impacting finance?
In every way imaginable. This blog series explores how finance leaders can harness these innovations to their advantage. This post examines cryptocurrencies.
An innovation beacon that’s challenging fundamental economic concepts
For hundreds of years, the number of currencies in the world has remained relatively stable, mostly centered around the concepts of a nation state and central banks. Even the common currency of the Euro maintained the concept of a central bank and national identities on their minted coins.
The advent of cryptocurrencies changes that in very fundamental ways. Emerging currencies such as Bitcoin are more than a new “online money” that can be traded and exchanged on the world market.
Because cryptocurrencies are based on a distributed ledger technology such as blockchain, they challenge the concept and business model of central banks and other traditional centralized institutions, the global gold standard, and government-backed securities. This new wave of innovation relative to value exchange and safeguarding may dramatically reduce their influence on the world’s economic foundations. Cryptocurrencies reinvent the concept of value, for example by creating value from raw computation, or from alternative sources of valuation yet to be invented.
A distributed and completely transparent exchange model
Finally, cryptocurrencies reinvent the concept of trust, as they are a truly distributed and transparent value-exchange model based natively on the speed, scale, and reach of the Internet. For finance professionals, this is a trend to be taken seriously in any strategy conversation. Traditional processes such as treasury and risk, cash management, banking, and payment integration will continue to be important. But these processes need to be automated to the highest extent possible to free up resources – and to give them time to engage with the new digital universe of cryptocurrencies and blockchains.
Rapid acceleration of competition and risk
Cryptocurrency technologies and processes such as blockchains, distributed ledgers, and so on are rapidly becoming the next disruptive business innovations to watch, especially for the finance organization. We are not far from the point when CFOs are going to be asked by the board and CEOs about their strategy around this movement; as a result, CFOs must begin to get familiar with the basics now. These trends have just begun disrupting the current finance landscape with new processes and emerging standards, accelerating competition and risk in the areas of creating and safeguarding value.
Finance leaders can keep up with the emerging era of digital value by:
- Speeding up the transition to a cloud architecture to gain speed of innovation and integration to new digital interfaces – for example, to enable smart contracts that can enforce terms and reduce fraud
- Moving their finance processes onto a single source of truth to unify transaction and analytics for better insight and foresight into emerging trends such as mobile payments and cashless economies
The final blog in this series will explore artificial intelligence – an innovation beacon at the leading edge of dramatic disruption. Look for that on Monday, June 12.