The premise of cryptocurrency seems innocuous enough and akin in some ways to a game of Monopoly Electronic Banking Edition. In the updated version of the classic board game, a dedicated banker virtually manages transactions throughout the game to eliminate the physical exchange of colorful cash.
Bitcoin, the OG of thousands of cryptocurrencies, was introduced in 2009 as a decentralized peer-to-peer payment network. In the nine-plus years since its inception—and mixed reception—cryptocurrency has transformed into something like a phenomenon, adding complexity and disruption to already uncertain and volatile business environments.
What blockchain means for finance executives
Blockchain technology, a distributed ledger system that is steadily gaining steam in many industries, was born out of the cryptocurrency era. At its core, blockchain technology is a way for businesses to digitally store data.
Blockchain technology provides a trusted record of transactions that is shared across a business network. Using a network of computers and complex algorithms to determine the validity of each transaction, it creates a record of transactions by linking them together to form a chain. Once the data is linked together, it can’t be altered, providing the most secure record possible because changes and unauthorized access are blocked and the data remains linked forever. It can’t even be deleted by a system administrator.
While the full scope of its opportunities continues to unfold, organizations using the technology often report a reduction in costs, heightened security, and expedited payment processes. For finance executives, the future of blockchain technology could improve business operations.
Three things that CFOs need to know about blockchain
With all the hype surrounding the benefits of blockchain, many CFOs might be tempted to pass Go and collect $200.
To better understand the potential of blockchain, here are three insights to consider as you look at testing the blockchain waters for your business:
- For enterprises, existing technology is the key to unlocking blockchain
The use of blockchain can free data from proprietary systems, which provides more information to analyze—a huge win when it comes to enterprise planning. Businesses with legacy or manual planning environments will face difficulty in integrating these systems with a distributed ledger system such as blockchain.
Cloud-based technology is key here: Businesses using cloud solutions can easily incorporate distributed ledger data, perform forward-looking scenario modeling, analysis and forecasting, and share stronger insights throughout the enterprise.
- Big benefits are in: Speed is up, risks are down
When companies receive traditional money payments via blockchain, transactions are accelerated, and the company gets paid more quickly. Finance transactions that used to take weeks or months can be completed in hours or mere minutes. Additionally, due to its encryption, storage, and verification of transaction data, it can significantly reduce the risk of any data security or fraud.
- Blockchain is primed to rock the supply chain
Blockchain is expected to have an enormous impact on supply chain operations, making compliance more affordable and reducing risks by providing for suppliers to meet goals, such as sustainability or fair-trade objectives. Check out this insightful blog for more insight into digital disruption in the supply chain.
To learn more about blockchain and its outlook for finance executives, you can read an insightful article from Tony Levy, Global Head of Finance Solutions at Anaplan, here.