Blockchain is a topic of conversation in the boardroom again, thanks to the prominence and success of a handful of global, enterprise-level implementations. Gartner’s listing of the distributed ledger technology as a top-10, strategic technology for 2020 validates its place on the boardroom agenda. Now, fresh proof of blockchain’s ability to take friction and cost out of supply chains in insurance and shipping may turn talk into action for other sectors.
To date, blockchain movers and shakers have typically been entrepreneurs and social enterprises, keen to exploit the immutable properties of the distributed ledger. Jewellery and art dealers are using blockchain to prove the provenance of high-value goods, and medical organisations ensure that drug supplies are not tampered with during transit. Forecasts from the World Economic Forum that 10 per cent of global GDP will be stored on blockchain by 2027 are whetting the corporate appetite for disruptive technology.
Corporations use trust authority to realise value
Danish shipping giant Maersk is a beacon for corporate blockchain spectators, operating its TradeLens platform to verify, track and trace cargo across supply chains. The blockchain provides a permission-based trust authority to ensure that every party to a shipment has access to their own information only, and a secure audit trail of all transactions. Removing manual, paper-based processes and embedding trust in transactions increases the value of the containerised freight market by 15 per cent, says Maersk.
Maritime insurance is another blockchain pioneer, similarly incentivised by the need to modernise antiquated, paper-based processes that have underpinned shipping for centuries. A group of players, spearheaded by EY and Guardtime, launched Insurwave in 2018, a blockchain that connects the shipping industry and effectively brings risk closer to capital.
Data sensors on board ships help capture a host of real-time variables and transactions during voyages, including whether a ship is flying the correct flag, weather conditions, and even change of ownership. Storing data immutably on the blockchain, and sharing with relevant stakeholders, means risk assessors, brokers and insurers can see whether contractual conditions are being met — and even whether to auction new risk as circumstances change.
Real-time, trusted data sharing creates new products
Likewise, ships’ captains can be ordered by owners to sail around war zones and minimise their risk, as ships are digitally tracked and geo-located on the blockchain. In its first year of operation, Insurwave captured multiple policy breaches with ships entering war zones. Analysis of big data logged on the blockchain provides other, value-creating opportunities for insurance companies — they can price differently, and create new products, as Shaun Crawford, global vice chair for industry at EY, explains.
Risks of storm, hijacking or war occurring during the passage can be underwritten in near real time as they occur, for example. But the immediate benefit is eliminating paper-based administration, says Crawford. “Paperwork of transactions relating to voyages that used to take 6 weeks can be automated in days and signed off with a digital signature. Brokers, liberated from the burden of paperwork, can do higher-value work for the fee, including looking at voyage data and advising on product and the amount of risk.”
Remove paperwork, reduce friction in supply chains
Blockchain’s ability to take out time-consuming and costly paperwork will have an immediate appeal to the corporate world, but there are other benefits too, which players will evaluate in the context of their own sectors. Removing friction in supply chains, by linking consumer to supplier, eliminates multiple non-value-adding processes and brokers. Less immediately obvious — but potentially more lucrative — the ability to share data, processes and events securely in real time along supply chains opens up new business value.
To date, the corporate world has chiefly confined its blockchain activities to pilots, and lavish amounts — especially in financial services — have been spent on proofs-of-concept. Advice from Gartner that public blockchains are presently too immature for enterprise deployment, due to poor scalability and interoperability, will focus efforts on private — or permissioned, as in the Maersk example — models.
With increasing numbers of blue chip companies and high street names going public with their blockchain implementations and outcomes, the technology will be stripped of hype and seen for what it is: a trust enabler. Accompanied, too, by a growing chorus from customers for more trust in their dealings — and at no extra cost to them — more enterprises will seek to turn blockchain dabbling into live action over the coming months.
Parts 2 and 3 of this series on blockchain will look at how governance and regulation are the keys to making blockchain operational, and how to get started with blockchain.