Financial Institutions are Leading the Adoption of the Blockchain. Who will Follow?
Banks and other financial institutions continue to spread love for blockchain technologies. Last week, Dubai’s largest bank, Emirates NBD announced that is working with India’s ICICI on a blockchain pilot for global remittances and trade finance which will target banks in the Middle East and India. The initial results of the pilot are showing significant improvements on the transaction times while also enabling near real time transfer of invoices and purchase orders fro trade finance purposes.
Emirate NBD’s announcement is the latest on a series of developments highlighting how financial institutions have been adopting blockchain technologies. In recent weeks, banks such as J.P.Morgan, Citi Group, Credit Suisse and others have announced different blockchain solutions. Similarly, Bank of America recently announced that is partnering with Microsoft to build a blockchain-based framework that can be adopted by other financial institutions.
While the news of banks adopting blockchain platform is encouraging, they certainly contrast with the limited adoption of those technologies in other industries. Finance institutions are natural adopters of blockchain technologies because they were exponsed very early to the capabilities of Bitcoin. However, we should expect other industries to catch up soon:
What are the Ideal Scenarios for Early Blockchain Solutions in the Enterprise?
There is no question about the tremendous potential of blockchain solutions across different industries. However, the initial development of blockchain pilots by financial institutions have surfaced some key characteristics of the scenarios that can be ideal early adopters of blockchain solutions. Let’s explore a few of those characteristics.
— Mission Critical: Adopting a new and immature technologies like the blockchain requires real commitment from customers. Typically, that level of commitment is directly proportional to the criticality of the business solution being delivered. By focusing on mission critical scenarios such as trade settlement, the financial industry has made significant progress in the adoption of blockchain technologies. Eventually, the industry will mature and blockchain solutions will expand to mainstream scenarios but, at the moment, blockchain startups and technology providers will be better served by focusing on mission critical scenarios that will drive the attention of enterprises.
— Exchange of Financial Assets: Many of the pilot scenarios for blockchain solutions in the financial industry included the exchange of financial assets. This is one of the key capabilities of blockchain platforms and one that is applicable to solutions in other industries.
— Visibility: The initial blockchain pilots in the financial industry have also focused on enabling visibility on complicated business processes across different business parties or regulatory entities. An example of this could be J.P.Morgan project Quorum that is planning on offering trading data to regulators via Ethereum. These type of scenarios are very relevant in other industries.
What Industries are Likely to be the Next Big Adopter of Blockchain Solutions?
Based on the lessons learned and the unique characteristics of the scenarios for the first wave of blockchain solutions in the finance industry, we can start speculating about the next industries to go big into the blockchain space. Here are a few ideas:
— Supply Chain: Visibility and verification are some of the main challenges in mission-critical supply-chain processes that an be affress by blockchain platforms.
— Insurance: Many business processes in the insurance industry have a strong asset-exchange component that resemble the blockchain scenarios implemented by the big banks. As a result, the insurance industry can also be a strong early adopter of blockchain technologies.
— Pharmaceutical: Offering regulators to have visibility into pharmaceutical processes is one of the mission-critical solutions that can be enabled by the blockchain in the pharmaceutical industry.
There are many industries that can immediately benefit from the adoption of blockchain platforms. However, in this early stages, it is very important to focus on the scenarios and vertical that can drive immediate business value and consolidate the position of the blockchain as a technology that can enable a new wave of innovation in the enterprise.