Globalization and digital transformations go hand in hand. As companies expand their global reach, they must also mature digitally. What’s entailed in a digital transformation? Companies implement a suite of technologies that will allow them to leverage a competitive edge by increasing efficiency and scalability. Some of the most pervasive technologies businesses incorporate in digital transformations today include artificial intelligence or machine learning, automation and blockchain.
Blockchain may be one of the most disruptive technologies shaping the global business landscape today. Originally developed to support transactions in Bitcoin, blockchain has exhibited unlimited potential beyond facilitating cryptocurrencies. The technology uses a decentralized network of computing nodes to validate transactions. In other words, no governing body controls it and transactions can bypass centralized servers. Key benefits include visibility, security and speed.
Most companies do business somewhere overseas. Practically every large company maintains regional headquarters in major global cities. Whether working with suppliers, customers or internal offices abroad, blockchain will catalyze business initiatives on the international stage.
Elimination of Paper
When conducting business abroad, many governments still require physical documents to be notarized and signed by designated authorities. With blockchain, mathematically encrypted keys create “signatures” that authenticate the approval of a transaction by a user. These signatures prove to be more secure in blockchain environments than written signatures in physical environments.
For example, when exporting goods to Egypt, the shipper or freight forwarder sends original documents to the Egyptian embassy to be legalized. This process often takes over a week and is a required step prior to export. Many governments worldwide are experimenting with blockchain implementation for everything from property rights to customs documentation. While countries like Egypt may always require legalization on commercial documents, blockchain may allow for instantaneous authentication.
Without the need for signatures or document processing services, businesses can potentially bid adieu to waiting days or weeks for documents to be mailed and pricey service fees issued by embassies and governing bodies for legalization.
Payments in Cryptocurrencies
The advent of Bitcoin and blockchain in 2008 only led to the proliferation of hundreds of cryptocurrencies worldwide. Today other cryptocurrencies such as Ethereum and Litecoin show even greater potential than their pioneering predecessor.
Cryptocurrencies will probably never fully replace traditional currencies, but will operate in parallel to the traditional financial infrastructure. According to research by McKinsey & Company, over $150 trillion in payments cross international borders each year. Nearly 80% of these transactions are business to business. Transactions typically take three to five business days to complete.
The traditional way businesses issue and receive payments inhibits operational efficiencies when it comes to visibility, speed and cost. It’s difficult to track payments effectively and know exactly when the delivery will occur. Long transaction periods often slow the total duration of a critical project or product launch. Foreign transaction fees and exchange rates can also detrimentally affect the commercial cost of products. Cryptocurrencies can ameliorate some of the challenges of cross border transactions through transparency, instantaneous processing capabilities and absence of an exchange rate.
Chain of Custody and Customs Audits
An added benefit of blockchain is its ability to trace the lifecycle of a product in a transparent manner. U.S. Customs and Border Protection (CBP) has an increasing stake and interest in tracing the chain of custody of imported goods for matters of security and trade compliance. As goods pass through stages of the supply chain, documentation solidified in blockchain can be viewed and easily traced by CBP for faster and more accurate audits.
Deloitte Luxembourg is utilizing blockchain to trace the whereabouts and validate the authenticity of fine art. Paper transactions in the art world pose immense threats to artists, dealers and buyers when it comes to fraud. Each time the work of art changes hands, the transaction is completed in blockchain. The lifecycle of the piece can be traced and verified for each subsequent buyer or collector.
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