How blockchain disruption will affect industries and your portfolio
When pondering the changes crypto assets are bringing to the way we invest today, we must see that the entire concept of blockchain technology carries significant disruption to companies and industries. For many investors, these disruptions will affect investments that have already been made or is under consideration.
For instance, if bitcoin influences the way remittances are handled, what impact may that have on stocks such as western union, a remittance powerhouse? If Ethereum takes off as a decentralized world computer, how will that affect companies with cloud computing offerings, like Amazon, Microsoft, and google?
If companies get paid more quickly and with lower transaction fees using the latest cryptocurrency, will that impact credit card providers like Visa and American express?
- Exponential disruption
First, disruptive products are more straightforward and cheaper; they usually promise lower margins, not greater profits.
Second, disruptive technologies usually are first commercialized in emerging or insignificant markets.
Third, leading firms’ most profitable customers generally does not want to, and indeed initially can’t, use products based on disruptive technologies.
- Blockchain across industries
Let’s look at a simple example with the food industry. Walmart recently tested its ability to identify contaminated food products in its stores. It can take the company many days to determine which suppliers and batches are infecting the people. Using the blockchain technology, Walmart can build a digital audit trail for a product from its original source, shipping company, inspection points, and warehouse. That way, every store can identify suspected food and remove it from its shelves quickly.
Here’s how Blockchain will affect other industries
- Healthcare: Doctors, clinicians, and facilities can have better access to health records without location being a problem.
- Transportation: The immutable nature of a platform that tracks time, date, and condition romoves delivery charges for things like delays and damaged products.
- Retail and manufacturing: Companies can track the provenance of products, responding to consumer demand for greater transparency.
- Oil and gas: The clear proof of origin eliminates concerns related to the black market and other suspicious sources.
- Finance: Consensus across members enables them to create an identity management system to support Know Your Customer (KYC) and compliance procedures.
- Government: Cities and municipalities can streamline and improve the permitting process for any of the activities.
A few of the largest tech giants are already seizing opportunities that blockchain technology offers:
- IBM and SecureKey have partnered to develop a digital identity and attribute sharing network based on IBM Blockchain.
- The Sovrin Foundation develops self-sovereign identity (SSI), a scalable, privacy-protected, auditable, and open identity system.
- Microsoft, Accenture, and some others launched the Decentralized Identity Foundation that develops a system for reliable identity on the internet.
- Microsoft and 13 other partners are improving visibility and traceability across industry supply chains.
- Backed by several credit unions, CULedger is working to solve the issue of identity management, information exchange, and transaction speed.
- Amazon, IBM, Microsoft, and SAP have also anoounced their foot into Blockchain.
Blockchain-as-a-Service (BaaS) on their respective cloud platforms.
The opportunities for industry advancements are endless. However, given the transformational nature of blockchain technology, it’ll take time before organizations fully understand how to take advantage of it. Blockchain implementation will require cross-industry partnerships and trust incorrect business and economic climates. To participate in this new frontier, companies should take this time to review and identify blockchain opportunities in their industry and consider partnering with an organization that will help them realize new products and services.
- Remittances and blockchain technology
One area long discussed as ripe for disruption is the personal remittances market, where individuals who work outside of their home countries send money back home to provide for families. The market is massive, with the world bank reporting worldwide remittances flows north of 700 billion, though it admits the estimate is conservative.
- How Blockchain may Transform the Financial Services Industry
Blockchain technology is one of the leading innovations in the finance industry, promissing to reduce fraud, ensure fast and secure transactions and trades, and ultimately help manage risk within the global financial system.
There are many financial uses provided by the Blockchain, not limited to keeping track of transactions and trades. As our global financial system becomes more interconnected in our age of digital transformation, investors would be well advised to educate themselves about how Blockchain is changing the system and how to gain and regulate exposure to this development.
- Benefits of Blockchain in Financial Services
Blockchain has the potential to help the financial services industry become more transparent, less susceptible to fraud, and cheaper for consumers.
- Improving transparency. Blockchain may help the financial industry be more transparent since users are performing activities on a public ledger. This transparency can expose inefficiencies like fraud, leading to problem-solving that may reduce the risk for financial institutions.
- Adding security. As consumers become increasingly active online, the digital universe is a breeding ground for online scammers. With blockchain technology, this concern potentially could be reduced. Payments and money transfers made on the Blockchain are faster and more traceable than in traditional banking, potentially lessening that.
- Lowering costs. As investors move away from financial advisors to avoid higher fees, Blockchain provides an opportunity for consumers to benefit from lower costs associated with traditional financial services.
Financial technology companies have become a massive part of the financial services industry, allowing investors to open accounts with digital advisors and make independent financial decisions. As fintech plays a more vital role in global finance, its relationship with Blockchain will inevitably become more robust.
This innovation can be good for consumers because investors are getting more for their money, and they’re getting a balance between automation of financial services and a lower cost.
- Risks that Blockchain and Financial Institutions Face
Weighing against the promise Blockchain holds for financial institutions is one significant risk affecting the bottom line: Traditional financial institutions make money on transaction fees that may be lowered or eliminated with blockchain technology.
When transferring money, consumers have to rely on banks or third parties to process transactions.
Furthermore, the adoption of Blockchain may bypass third parties such as banks, which would eliminate fees and other costs associated with these services. As a result, banks may face challenges in volume and transaction-based revenue.
In addition, blockchain innovation is moving so quickly that regulation hasn’t caught up with it yet. So the potential policies impacting Blockchain can be seen as another obstacle in incorporating Blockchain in financial services.
Regulators are working on figuring out the pros and cons of blockchain technology to see if it’s suitable for financial institutions and the potential consequences for companies and consumers.