SINGAPORE (Dec 18): The Monetary Authority of Singapore (MAS) and Hong Kong recently announced that by 2019, a cross-border platform will be set up to boost trade finance using distributed ledger, or blockchain technology. The key benefit of this development is that it will make trade finance more efficient and minimise various fraud-related risks.

See: Singapore to work with Hong Kong on blockchain-based trade financing

See: MAS to collaborate with MIT in fintech

In the business world, the value is similar – blockchain technology can dramatically boost efficiency and reduce costs in many areas. For example, smart contracts in blockchain networks can enable more efficient, transparent and cost-effective peer-to-peer exchanges of data, assets and currencies.

A study by Cognizant reveals that most firms today are already assessing how to modify existing processes and systems to support blockchain. Firms that move fast will capture the elusive first-mover advantage, while those that choose to err on the side of caution will be left behind by today’s rapid pace of innovation. How, then, can forward-looking companies put their best foot forward?

See: Building blockchain one block at a time

Be comfortable with risk
A key piece of advice for firms that wish to get ahead in blockchain is to strive for clarity, but accept uncertainty. Since blockchain is still in the early stages of development, innovation will continue throughout the entire ecosystem, and infrastructure will evolve.

Learning will also be iterative, and costs and benefits may only become more clearly defined as projects progress. Many other reasons to move forward with blockchain adoption could be strategic and cannot be quantified at the outset.

However, with clearly set goals, businesses can minimise risks and maximise benefits. Hence, this is not an issue that should be left strictly to the tech department. Instead, key business stakeholders need to be involved right from the get-go to define the business opportunities that blockchain can enable and set clear objectives for blockchain projects.

The risk of doing nothing is much greater than the risk of doing the wrong thing, so businesses should get a head-start on blockchain adoption as soon as they can and proceed with caution.

Identify the right opportunity
Firms should first identify what it is that they are trying to achieve. This is critical to having a clear idea of the expected outcome. If it is a process that merits improvement, they should check if blockchain can do so in the most effective manner. This way firms can objectively leverage blockchain to iron out existing inefficiencies and derive tangible benefits.

A common perception of blockchain is that it can only enable cost-savings. However, blockchain networks can also create new revenue opportunities in several ways. With blockchain, banks can look to tap into unexplored overseas opportunities such as international payments, lending, and so on. Banks can also think of applying blockchain technology to a know-your0customer (KYC) solution in order to easily share credentials and turn a portion of the business that has historically been a cost centre into a profit centre.

Identify the right platforms
Choosing the right platform will also be critical in making or marring your business’ blockchain success. The decision should consider both technical and business aspects, since the best platform is one that is tailored to your organisation’s needs, including security, privacy and smart contract capabilities, as well as whether the network appears to have the potential to survive over the long term. 

In fact, the biggest external obstacles to blockchain are concerns surrounding privacy/security, and scalability/latency, as reflected by 69% of respondents in the study.

The best approach is for firms to explore a wide variety of platforms and choose the most appropriate technology for each business use case – not the one that is getting the most market attention.

For now, future-ready companies can start by examining existing business processes and technology systems to determine if they need to be redesigned to fully leverage blockchain capabilities. This will put your firm in the best state to hit the ground running, once the right technology solutions have been chosen.

Stop, collaborate and listen
The final block to blockchain success is a culture of collaboration. Don’t underestimate the importance – and challenge – of managing the people-side of change. This is especially so in the area of blockchain, where the greatest benefits will go to firms that can effectively participate in networks of partners, customers and competitors.

According to the study, such wide-scale collaboration will be a new experience for many firms, and 56% of respondents cite working with ecosystem members as a principal obstacle to adoption. Hence, forward-looking organisations should start gaining critical experience in working with industry partners – including, among others, banks, fintech start-ups, IT advisors, and in some cases, even regulatory authorities – on blockchain projects and assess both internal and external obstacles to broader collaboration.

Blockchain’s potential is enormous, but so is the hype. Although only time will tell who will ultimately win the race for blockchain success, those that get a head-start now are better positioned to gain a significant edge against the competition.

Nachiket Deshpande is Global Head of Delivery, Banking and Financial Services, Cognizant. The author's views do not represent those of The Edge Singapore.