Blockchain is a sophisticated ledger system. The Financial Times defines blockchain as “a shared digital ledger that allows transactions to be recorded and verified electronically over a network of computers without a central ledger. Cryptography is used to protect the data from fraud or hackers”.

The three main properties of blockchain are:

  • decentralisation,
  • immutability, and
  • transparency

Blockchain is said to drive businesses and organisations into the future. This is mainly due to its impact on multiple sectors such as insurance, healthcare, banking, real estate and government.

A survey conducted by Deloitte Consulting LLP in 2018 that polled a sample of over thousand senior executives in seven countries (Canada, China, France, Germany, Mexico, United Kingdom, and the United States) at companies with $500 million+ annual revenue, showed interesting results:

  • About 59% of early adopters in the business community believe in blockchain’s potential to disrupt and revolutionise their industries and the overall economy.
  • 16% of the respondents believed that their organisations will make an investment worth $10 million or more in the blockchain technology.
  • 69% of respondents agreed that they are planning to replace current systems (e.g. financial ledgers, ERP and CRM etc.) with blockchain.

Blockchain has had a major impact on the financial services sector. Some of the areas where this technology is used include:

  • Asset management
  • Insurance
  • Supply Chain
  • Payments
  • Compliance

KPMG professionals anticipate blockchain will connect with existing financial systems and lead to a gradual integration where ultimately data can be viewed in real time.

Just like every other sector of our economy, finance sector also faces its own set of traditional challenges like lack of supervision and regulation, lengthy processes, fraud, unavoidable human errors and absence or inadequate internal control measures. Blockchain overcomes most of these challenges faced by the financial services sector.

Let’s take a look at few points on the benefits of blockchain technology in finance and accounting sector:

  1. Real time audit and assurance benefits: With the use of blockchain, financial transactions can be audited in real time, leaving a very detailed audit trail. This is possible because the data stored in the blockchain is immutable. Here, immutability doesn’t mean that changes cannot be made at all. It means that further changes in the block can only be made with the approval of all the members.
  2. Reduced risk to investors and stakeholders: Transparency is one of the key features of blockchain technology. This is possible due to decentralisation of data. The data is dispersed across different locations and people and is visible to everyone on the network. Enhanced transparency with increased security in operations reduces the risk to investors and stakeholders.
  3. Fraud prevention and deterrence: Blockchain is a decentralised technology. The benefits of decentralisation can’t be stressed enough. The data is stored in multiple locations. It is constantly reconciled into the database, which is stored in multiple locations and updated instantly. Since there’s no central location, the data is verifiable and can’t be easily tempered with.
  4. Increased level of efficiency: With targeted processes, productivity can be increased from an operational view point. Also, the problem of delays and, conflicts and confusion due to duplication of information can be eliminated with the use of blockchain.
  5. Faster transactions: With the use of blockchain, transactions can be settled instantly which saves considerable time and money for both the parties involved. This is especially true in case of banks. In 2018, Bank of Canada ran a test along with the Toronto Stock Exchange operator TMX Group, and non-profit organisation Payments Canada. Their test showed that “automating instantaneous securities settlements becomes possible with blockchain”.

To summarise, blockchain technology is radically transforming the roles of finance professionals. This technology has tremendous potential to change how the financial sector functions and transform the future of finance.

 

Square Mile Global Consulting offers accredited e-learning courses on Blockchain, Cybersecurity and Data Analytics fundamentals to finance, audit and accounting professionals.

These courses are accredited by the American Institute of Certified Public Accountants (AICPA). All courses come with Certificate of Completion from the AICPA and a Digital Badge is offered on completion of the Certificate courses.

Our Blockchain Courses (discounts currently available):

Blockchain Fundamentals for Accounting and Finance Professionals Certificate

Blockchain for Financial Services

Blockchain for Insurance