In this blog series, we’ve looked at what blockchain is and, in general, what it can do for Finance and Risk.

But what are some actual use cases for blockchain in Finance and Risk? In our view, three streams of activity point to where blockchain is headed in Finance and Risk:

  • Internal solutions: Individual organizations are realizing they can generate benefits from blockchain technology to improve data management and process efficiency.  Examples include linked data sets of trade, position and reference data joined through smart contracts.
  • Market infrastructure: Some activities provide platforms and industry-wide solutions that let businesses tap into the underlying blockchain capabilities. An example of this is repurchase orders clearance and settlement, where the Depository Trust and Clearing Corporation is working with industry participants to increase efficiency of and reduce costs in the $3 trillion per day market. [1]
  • Consortia: Groups of companies are getting together on a bilateral or multilateral basis to solve for mutual data requirements and cost savings.
    • Industry focused consortia include enterprise software firm R3 and B3i (Blockchain Insurance Industry Initiative), for Capital Markets and Insurance, respectively.
    • Technology focused consortia include Hyperledger, a Linux Foundation Project, and the Enterprise Ethereum Alliance™.

Projects in these areas highlight the disruptive potential of blockchain, starting from addressing an enterprise’s specific internal business scenarios to transforming the way whole industries function.

Fundamentally, blockchain can be applied in virtually any business area needing a distributed database with multiple parties transacting with each other (or transferring assets), and where a relationship between the parties and the transactions needs to be securely recorded for traceability purposes. Hence, the scope for implementing blockchain for Finance and Risk is huge.

Blockchain’s other characteristics, including decentralization, distribution, security and anonymity, make it useful in addressing common Finance and Risk business challenges. For example on the finance side, blockchain can support:

  • Financial Services supply chain, including document management, traceability, provenance and finance
  • Client Asset Sourcebook (CASS) 5 Client Money calculations
  • Tax Liability Reporting
  • Islamic Finance Accounting (fits with the no interest principle)
  • Project Finance

On the risk side, blockchain supports:

  • Compliance workflow tool for various compliance applications
  • Anti-Money Laundering (AML) and Regulatory Compliance, e.g., sanctions checking and transaction reporting
  • Forex (FX) trading, using blockchain to improve settlement cycles
  • Financial Services Compensation Scheme (FSCS) deposit guarantees tracking
  • Sarbanes Oxley control

As we’ve seen, blockchain can be quite useful in the Finance and Risk world. But this list isn’t exhaustive. Our next post will review areas that Accenture is actively investigating for blockchain potential.

 

References

  1. “DTCC & Digital Asset Move to Next Phase After Successful Proof-Of-Concept for Repo Transactions Using Distributed Ledger Technology,” DTCC Press Release, February 27, 2017. Access at: http://www.dtcc.com/news/2017/february/27/dtcc-and-digital-asset-move-to-next-phase

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