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4 ways blockchain is the new business collaboration tool

Lucas Mearian | May 24, 2017
Smart contracts, healthcare data-sharing and microgrids are all taking advantage of the technology.

Blockchain distributed ledgers can be used to automatically execute business contracts. The peer-to-peer database first captures all terms and conditions between an organization and its customers, then uses data gleaned across distributed nodes or servers to determine when those conditions have been met and payment is authorized.

For example, an insurance company could pen a policy for farmers that states they will be paid if a drought affects agricultural production; the condition of the contract may statetcat if a drought persists for 30 days, payment is made. There is no need for human intervention in determining whether those drought conditions have been met and payments can proceed automatically, streamlining the process. The result: saved time and money.

In a similar way, blockchain-based smart contracts can be used to automatically execute payments between financial institutions.

Accenture recently released a report that claimed blockchain technology could reduce infrastructure costs for eight of the world's 10 largest investment banks by an average of 30%, "translating to $8 billion to $12 billion in annual cost savings for those banks."

Payments, clearance and settlement in the financial services industry -- including stock markets -- is rife with inefficiencies because each organization in the process maintains its own data and must communicate with the others through electronic messaging about where it is in the process. Because of that, settlement typically takes two days. In turn, delays in settlements force banks to set aside money that could otherwise be invested.

With its ability to instantly share data with each organization involved in a blockchain database or ledger, the technology reduces or eliminates the need for reconciliation, confirmation and trade break analysis as key parts of a more efficient and effective clearance and settlement process, according to Accenture.

 

Enabling businesses to avoid transaction fees

Most payment systems are administered by financial institutions, such as banks. When money is transferred between businesses, there's typically a fee associated with it -- especially for small to mid-sized businesses.

Large enterprises have always enjoyed an advantage in the global market, be it the capital to absorb the cost of transfer fees (or getting lower fees), better intellectual property protection, and a host of other advantages that come with having more  capital and greater influence.

Blockchain technology helps level the playing field, enabling SMBs to compete in that global market.

For example, the B2B payment service Veem, leverages blockchain to allow its SMB customers to transfer funds internally for no fee; that compares to larger banks that charge around $50 per wire transaction.

Veem's CEO Marwan Forzley believes blockchain is an opportunity to "remove the middle man from international transactions, which directly impacts the experience of paying suppliers and contractors, the timing of these transactions and the fees that are directly impacting the SMBs bottom line."

 

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