The media hype about Bitcoin, Ethereum and other cryptography-based applications has been going on for some time. The Distributed Ledger Technology (DLT) behind them – commonly known as “Blockchain“ – is said to have disruptive potential to radically change processes in the financial services industry. According to a recent study, “Blockchain technology has the potential to change not only the global foreign exchange market, but the banking sector as a whole, by eliminating existing intermediaries and replacing them with a trusted, borderless and transparent system that is easily accessible to everyone.“ Blockchain technology has the potential to help banks and insurance companies enable faster and more cost-effective transactions, improve access to capital, create more data security, enforce trustworthy agreements through smart contracts, or make compliance smoother.

Swiss banks are (still) hesitant

Thanks to shared database technology, blockchain-based systems can replace central instances in many areas. This is possible because the DLT validation algorithms guarantee the trustworthiness of the recorded transaction data without any intermediaries. Although Switzerland, as a global “Crypto-Valley“ with more than 800 companies in this sector, is a technological pioneer, the country‘s banks are rather reluctant to invest. According to a survey by the National Bank (SNB), only very few financial institutions describe Blockchain as “one of the most important innovative technologies in the next three years“. In our view, however, this assessment is only partly correct. Indeed, the topic is still often only discussed or is in the pilot testing stage. Actual productive applications are still rather rare. But we are convinced that this will change fundamentally in the next ten years. The potential that Distributed Ledger Technology holds for financial service providers should not be underestimated. Therefore, now is the time to look into it and position yourself.

Many scenarios for practical use

There are a number of possible areas of application – for banks, for example, they range from the creation of new trustworthy ecosystems to interbank clearing, from simpler granting of small loans to new solutions to prevent money laundering and better compliance with know-your-customer requirements or more efficient securities processing. For insurance companies, issues of legitimacy and identity or fraud detection and risk minimization are an issue. The same applies to loss prevention and management of smart contracts. At a service provider for animal data, we developed several useful use cases for their business in the course of a workshop – for example for a trading platform in the field of livestock, the compulsory registration of animals, border crossings of pets or an owner register. One use case referred to the animal insurance of dogs and cats. In our proposal animal insurance contracts can be automated as far as possible by using Smart Contracts. For this purpose, insurance-relevant data (e.g. animal health data) from the databases of the animal data service provider are fed fully automatically into the Smart Contracts, where they can be viewed at any time by all parties involved – such as veterinarians and clinics, dog and cat owners or the animal insurance company – in a tamper-proof manner. In the Ethereum blockchain, in addition to the “Unique Identifier“ of the insured animal, the definition of the policy calculation criteria is also stored, so that the execution of the contract can also be processed automatically – from the premium calculation to the execution of payments between the wallets of the parties involved. The introduction of use-based insurance models with the help of the Internet of Things (IoT) will certainly also be a topic in the next few years. And there would certainly be much more to mention.

To this day, the topic of blockchain is sometimes perceived in such a way that on the one hand there are the large, traditional companies, while on the other hand there are the small, young, agile start-ups with innovative Blockchain technology solutions. But the industry has to get beyond this black-and-white thinking. For example, an increasingly “hybrid“ ecosystem could develop over the next few years, with crypto-newcomers from the field of DeFi (Decentralized Finance) working closely with traditionally positioned financial service providers, with the services and core competencies of both partners complementing each other.

Preparing now for the future

For quite some time, we at ERNI have therefore been offering financial service providers a “Blockchain Assessment“. In a workshop lasting several days, we first analyze the customer‘s business areas and evaluate the associated potential for the use of DLT. In the case of the animal data service provider, the three workshops were spread over two months. On the first half-day, the basic areas of application of the blockchain technology in the specific industry and the development of the six possible use cases were discussed. In the second workshop, these use cases were then evaluated in more detail, resulting in a shortlist of examples that would most quickly produce tangible benefits for the company and that would not involve too much project complexity. The front-runner was finally looked at more closely in the final workshop. Among other things, we presented the blockchain technologies examined for this case with their advantages and disadvantages and possible architectural solutions. We also presented a possible user journey for the end user and the expected costs for the implementation. Potential for the use of DLT – according to our practical experience from such “blockchain assessments“ – usually occurs when the need for security and transparency are important factors or when many stakeholders are involved. A certain degree of digitization in the company is also important. For those areas that we believe have potential, we then work with the client to develop a proposal for implementation and an implementation strategy. In doing so, we show in concrete terms how the blockchain-based solution will work. And last but not least, we also provide an estimate of expenses and cost analysis. In this way, as consultants we help banks and insurance companies to be prepared for future developments at an early stage and to achieve competitive advantages – and all this with a manageable budget and effort in experimenting and learning.


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