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Cover Story: How blockchain can revolutionise business

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The term blockchain, for most people, is all about cryptocurrencies, and in turn the headline-grabbing roller-coaster of cryptocurrency valuations. But the much bigger story is the technology’s enormous potential to transform the way business is done – and the coming revolution is already quietly under way in numerous industries.

Blockchain works on the basis of decentralised accounting that allows network participants to approve, validate, time-stamp and confirm transactions without the need for intermediaries, such as banks. Transaction data is stored in blocks and the transactions are chained together in a highly tamper-resistant form.

This “distributed ledger” is not owned or controlled by any single entity. It enables transparent “per-to-peer” transactions that eradicate any doubt over ownership. And it can speed up transactions that might currently take days or weeks for confirmation by a bank, for example.

RG Business takes a look at some of the industries ripe for blockchain disruption.

Shipping

The global shipping industry involves a complex web of intermediaries as transported goods are moved around the world and across borders. This mass of bureaucracy adds double-digit percentages to the cost of shipping – and much of it could be stripped out by an effective blockchain system.

IBM and Maersk, giants of technology and shipping, have been working together on a blockchain technology for cross-border supply chain management. It could be as transformative to shipping as the mass introduction of standardised containers in the 1960s.

The industry still relies heavily on paper documents. In 2014, Maersk tracked a container filled with roses and avocados from Kenya to the Netherlands. Almost 30 people and organisations were involved in processing the box on its 34-day journey, which included ten days of waiting for documents to be processed.

Creating a vast, integrated network that shipping lines, port authorities, brokers, cargo sellers and buyers, and insurers can all join is the vision of IBM and Maersk. It could speed up delivery of goods, reducing wastage of perishables in the process, and slash billions of dollars off administration costs.

Insurance

Many insurance CEOs have openly commented in recent years that their industry is inefficient and needs to be modernised, to reduce operational friction costs from, for example, duplications among multiple parties and cumbersome claims processes, and to meet customers’ expectations of bespoke and immediate service in the digital age.

Blockchain technology can enable “smart contracts”, capable of self-executing when verified conditions are met. Good examples are a life insurance policy with a contract that can perform checks against a death register to pay out automatically. Or a travel insurance policy that auto-pays when an official source indicates a flight cancellation.

AIG, in a successful blockchain pilot programme, has already proved that a multinational insurance policy covering four countries can be digitally coded onto blockchain as a smart contract.

Bermudian insurer XL Catlin is one of the backers of B3i (the Blockchain Insurance Industry Initiative), which incorporated in Switzerland in March this year. It has completed a blockchain prototype for property catastrophe excess-of-loss reinsurance contracts. Almost 40 companies were involved in the market testing, illustrating a broad-based desire to get involved.

There are still significant hurdles to be overcome. For blockchain to make a serious impact on the industry would require large technology investments and sharing of information among multiple parties.

Healthcare

The cost of healthcare is becoming an increasing strain in many countries, as populations age and people live longer. Among its inefficiencies is record-keeping. The industry struggles to keep track of medical histories as patients move from place to place, or receive services from different sources.

In the US, the idea of a blockchain-based Master Patient Index has been touted to help combat such problems. IBM, which already offers blockchain applications for the healthcare industry, states: “Blockchain-stored records can be used to provide complete longitudinal health records for individuals, giving all patients more control over their own information through verifiable consent.” Such a system could massively reduce administrative costs.

Mortgages

The process of borrowing money to buy a home can seem unnecessarily slow, cumbersome and expensive. Wherever there are “middle men”, blockchain can disrupt. Take the ambitious Bermudian start-up, Viva Network Holdings Ltd, founded by a group of island entrepreneurs including Nick Thomson, Christian Fiddick and William Lewis.

Viva plans to raise capital through crowdfunding to lend across borders, cutting banks out of the process. To achieve this, Viva will use its smart contract-enabled fractionalised mortgage shares (FMS) innovation. The idea is that investors will be able to buy FMS with VIVA tokens, in order to receive steady returns over time, while borrowers will receive funds in their local fiat currencies and lower borrowing rates than they can get in their home countries. Viva plans to crowdfund its first home loan by the second quarter of 2019.

This article was featured in the May 2018, RG Business Magazine.

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