COVID-19 has acted as a catalyst, pushing businesses worldwide to adopt innovative digital solutions in order to combat the effects of the pandemic. As we acclimate to hybrid ways of working, it is imperative for organisations to understand the potential for emerging technologies such as blockchain, to add value to digital transformation initiatives.
Even without the pandemic as a factor, the explosion in global trade that we witnessed in recent years is evidence of a pivot in consumer preferences for digital platforms for all aspects of life including leisure and work. As such, traditional transaction models will no longer be adequate.
Data security therefore, is an increasingly important factor in driving digital growth. Technologies like blockchain, or Distributed Ledger Technology (DLT) solutions, provide one of the most robust services to ensure data security, transaction authenticity and traceability while sharing data across global trade channels. Research reveals that global spending on blockchain-based solutions will reach $11.7 billion by 2022. But before investing in DLT, organisations must first understand how exactly it will accelerate digital transformation.
What is blockchain technology?
To gauge how DLT functions in these settings, businesses must understand that blockchains come in two forms: public and private. Take cryptocurrencies as an example. Blockchain applications in cryptocurrencies rely on “public permissionless” networks, where all parties have equal rights to transaction creation and validation, as well as the ability to produce new blocks. “Private permission” networks, on the other hand, are most relevant to enterprise applications, mostly due to the confidentiality it offers – a crucial factor for corporate data sharing. As blockchain provides permanent records of data, this offers traceability across all stages of a business process. This creates total transparency for processes like material sourcing within the manufacturing industry.
To understand blockchain’s capabilities, it is useful to note that its value is rooted in its ability to share data instantly in a secure manner. Blockchain is a digital ledger of transactions with unique characteristics that are virtually impossible to replicate for fraudulent purposes. It records information and is independently verified by peer-to-peer computer networks, without the need for third parties. In simple terms, it is a time-stamped series of immutable records of data that is managed by a cluster of computers not owned by any single entity. Each node in a blockchain network is validated and bound to one another using cryptography, making it resistant to modifications and in turn, incredibly secure.
Many associate blockchain with its first and most famous application – Bitcoin. While it is most commonly used in cryptocurrency, there are many other commercial uses for blockchain, including optimising real-time IoT operating systems, monitoring supply chain and logistics, and even personal identity security.
Creating new value
Historically, individual traders have led the charge when it comes to blockchain through crypto trading. While it has continued to gain momentum, blockchain in industrial applications has also witnessed growth, particularly in the banking, financial services and insurance (BFSI) sector. In fact, 77% of global financial businesses adopted blockchain-enabled services as part of their system and processes as of 2020. One way blockchain technology has been used in this sector is to transform legacy payments systems. Many companies have already started to incorporate Bitcoin and other blockchain currencies such as Ethereum and Tether for international remittances, as it enables them to avoid the high fees and slow processing times that come with traditional remittance payments.
While the BFSI sector is at the forefront of blockchain adoption, industries like healthcare can also benefit from DLT. Tech Mahindra recently partnered with StaTwig to manage the traceability of the global COVID-19 vaccine supply through blockchain technology. In addition to improving transparency across the supply chain, the VaccineLedger solution also helps prevent issues such as expired vaccines being mistakenly distributed and used. With blockchain technology, health institutions have complete traceability of the vaccination’s journey from sourcing to the hospital floor. This, in turn, prevents potentially dangerous incidents such as vaccine counterfeiting.
Sectors like manufacturing are also finding value in blockchain technology. With blockchain, manufacturers and suppliers can trace components and raw materials through the entire remanufacturing process, ensuring that parts can be traced back to a point of origin in case of a product recall or malfunction. TradeLens, for example, a blockchain network for global shipments, has been adopted by dozens of global carriers, customs authorities, freight forwarders, and port authorities. The use of blockchain in this sector increases visibility across goods shipments, allowing partners to track their shipments more closely, while decreasing shipping times and increasing efficiency as shipments traverse global routes.
One emerging use case we have developed in the UK has helped to simplify and streamline the increasing demand for customs and shipping documentation that is needed even for trade between the UK and Europe. Not only will this enable secure trade transactions but it will also speed up the processing time for shipments, thus avoiding manual errors and bottlenecks across the supply chain – from shippers to importers to payment banks to HMRC.
While blockchain technology creates transparency for the manufacturing industry, its value, in combination with other emerging technologies such as AI, should not be underestimated. To unlock blockchain’s full potential, it can be deployed alongside AI solutions to analyse, in real-time, the wealth of data that is generated from the blockchain, and as a result, generate end-to-end insights across the entire supply chain. Blockchain solutions give businesses the ability to gain greater visibility into supply chains and track assets with unrivalled precision.
Embracing blockchain technology
Blockchain technology is fast growing out of its cryptocurrency shadow and is revolutionising internal processes across all sectors as a result of its ability to securely share data while offering complete traceability. Industries such as healthcare, logistics, and manufacturing are already seeing the impact of blockchain technology to solve problems old and new and this will only continue to gain momentum.
Through the adoption of blockchain solutions, businesses will see improved legacy systems, processes and a heightened level of transparency and efficiency across the supply chain at all levels. Innovation within internal processes is key in today’s increasingly digital world. Companies that do not adopt blockchain risk falling behind the pack
Bhushan Patil is SVP EMEA at Tech Mahindra
