Author: cleahy

IBM has proposed blockchain technology to solve Wal-Mart’s issues with identifying and containing food safety outbreaks. The proposed technology will allow Wal-Mart to track products in their supply chain from the farms and factories of their suppliers to the shelves in their stores. Currently, their supply chain management can takes weeks to identify and remove products that are infected with bacteria such as salmonella. The lengthy process significantly impairs Wal-Mart’s ability to protect their customers resulting in damages their brand image.

Not only does IBM’s proposed blockchain technology benefit grocery retailers such as Wal-Mart, but it also has the potential to benefit international shipping. IBM pitched their technology to Maersk, a global shipping giant, as a method to decrease the cost of maintaining the paperwork required to import and export goods. Processing the paperwork for the shipment of goods usually includes around thirty people between customs, tax officials, and health authorities. A distributed ledger technology can help to expedite the process reducing their paperwork costs that currently equals the cost of shipping the physical containers. The blockchain can also reduce fraudulent tampering with bill of lading documents reducing the frequency of stolen or counterfeit goods.

Resource: https://www.nytimes.com/2017/03/04/business/dealbook/blockchain-ibm-bitcoin.html

Blockchain technology has been described as the ultimate solution to several of the banking industry’s largest inefficiencies. Ryan Zagone, an executive at a crypto-currency firm joked at a blockchain event “it felt like blockchain would fix every financial problem and cure zika along the way. We’re in a hype cycle.” The theory and potential use cases of blockchain has created significant optimism among investors and executives.

While there has been significant hype around the technology, there has been little success of its applications. To illustrate this, Ryan Zagone points to Vermont’s failed implementation of blockchain to keep track of land titles. The core issue experienced in Vermont’s implementation of blockchain is that the technology is too complex for practical in-house use. In the near future, it seems that the technology will only be adopted in areas where the complexity of blockchain is outweighed by its provided benefits. An example would be cross-border lending where mitigating the risk of dealing with untrusted parties will greatly increase their efficiency. Overall, blockchain has the potential to benefit several industries, but its complexity will make it difficult for the technology’s wide spread adoption.

Resource:

http://fortune.com/2016/11/02/blockchain-failures-successes/

Enterprise Ethereum Alliance is a non-profit foundation created to develop the first blockchain open-ledger technology for banks. The foundation includes J.P. Morgan Chase & Co., Microsoft, Bank of New York Mellon Corp., Intel, and Banco Santander SA. The group is seeking to expand on J.P Morgan’s open-source software, Quorum, in order to eliminate the cost of third party transaction verification. The foundation is seeking to release a working version of the technology later this year.

At its core, the technology is being applied to the banking industry to reduce the cost of having third parties and middlemen oversee transactions. The consulting firm Accenture estimates that if this technology is successfully adopted, it could save some of the largest banks an average of $10 billion annually in costs by 2025. This alliance demonstrates that the interest in blockchain technology for banks is continuing to grow. While a working version of blockchain has yet to be established, the first bank to produce it will acquire a significant competitive advantage. In order to be successful, banks will need to create a blockchain platform that maintains protection over proprietary information in the distributed ledger.

Resource:

http://news.morningstar.com/all/dow-jones/technology/2017022811009/the-newest-bank-blockchain-will-this-be-the-breakthrough-update.aspx

Blockchain is the underlying technology that supports the digital currency Bitcoin. The technology is a system of distributed ledgers. To validate the transactions on the ledgers, independent users verify the transactions. Once the transaction has been verified, it is stored permanently in the distributed ledger.

Traditionally, third party auditors carry out the function of verifying transactions. Through adopting blockchain, auditors can rely on the already verified transactions that are permanently stored in the system. This will reduce the time required to perform an audit since auditors will no longer have to verify individual transactions.

Adopting blockchain may allow third party auditors to rely on the blockchain auditors and focus more on a governance role for the types of blockchain transactions. Overall, blockchain is changing the way that financial transactions are being recorded and as such will disrupt the industries that have been created to verify the transaction systems currently in place.

Resource:
http://economia.icaew.com/features/july-2016/how-blockchain-will-impact-accountants-and-auditors

With over $1.4 billion invested in blockchain applications, the technology is seeking to ready its self for wide spread application. While the technology is seeking to significantly disrupt the financial services industry, it is experiencing an issue in its application due to one of the fundamental principles of blockchain. The principle that all transactions are permanent establishes trust for users, but does not provide a method for the correction of human error or hacker theft.

In the financial services industry today, human error is a reality that is taken into consideration and has safeguards to correct the issues. In order for blockchain to truly be ready for widespread adoption, the technology needs to provide solutions to the challenges that are inherent to human interaction with the system. To accomplish this task blockchain companies will need to work with regulators to establish safeguards that provide users the ability to alter blockchain transactions that does not diminish trust in the system. Overcoming this challenge is blockchain’s biggest hurdle because it is the permanence of the system that provides users with the trust that traditionally has been provided through third parties.

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Blockchain is a distributed public ledger that was first introduced as the base technology for the digital currency Bitcoin. Currently, Provenance, a UK based blockchain company, is seeking to use the technology to provide consumers greater transparency in the supply chain journey of the products they are purchasing. The mission of Provenance is to provide consumers with the ability to effectively support companies whose business operations are ethical and socially responsible.

An example of how this technology could be used is with tracking the supply chain of canned fish. The blockchain technology would be used to illustrate to the consumer where the fish was caught, processed, packaged, and distributed for sale. Through creating supply chain transparency, Provenance is giving consumers the ability to combat the illegal fishing and human rights abuses that are common in the seafood industry. Overall, this technology will not directly reduce unethical business practices, but it will provide consumers with greater power in supporting ethical business operations. Provenance’s use of blockchain is just one example of the numerous applications of the revolutionary technology.

Reference:

https://www.theguardian.com/sustainable-business/2016/sep/07/blockchain-fish-slavery-free-seafood-sustainable-technology

With $19.1 billion invested in fintech companies in 2015, investors are beginning to question the true value of companies categorized as fintech. The term fintech has been used to describe a wide range of companies. Subprime lenders that state that fintech can lower default rates is one area of concern by investors. An example of this is Elevate Credit and LoanDepot. Both companies sought to go public, but pulled their I.P.O.s due to concern from investors in the true value of the companies.

The rapid investment in fintech can be compared to the “.com” bubble of the early 2000s. Within the industry there is a mix of financial companies utilizing technology and technology companies that are in finance. The main area of concern for investors is the worry that companies are categorizing themselves as fintech in order to appear more attractive. Overall, fintech is a relatively new industry and it is time that will aid investors in determining the true value and category that fintech belongs.

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FinTech has disrupted the financial services industry by bringing technological innovations to the well-established industry. While FinTech has created many technological innovations in the financial sector, Fintech has created new areas of fraud. FinTech such as crowd funding and peer-to-peer platforms have provided consumers with the ability to access new methods of investing and acquiring loans that do not have the same regulatory oversight as traditional methods. FinTech is creating new marketplaces for financial transactions to take place. The marketplaces that are being created through FinTech are experiencing high risks of fraud due to the lack of regulatory oversight on the rapidly evolving industry.

In order to combat the increased fraud risk as a result of FinTech, the RegTech industry has started to develop with FinTech. RegTech describes technologies that increase the efficiency of operations by providing legal and regulatory compliance. Some examples of RegTech used to combat fraud are biometrics and tokenization of transactions. With the creation of new marketplaces and faster payments, it is critical to continue to adopt regulations to FinTech in order to prevent serious financial fraud from occurring.

Reference:
https://www.taylorwessing.com/download/article-fraud-in-fintech.html

With virtual currencies becoming more popular, the I.R.S. has started to seek oversight on these transactions in order to ensure that the proper tax regulations are being followed. Companies such as Coinbase have provided users the opportunity to anonymously store and exchange their digital currency. The I.R.S has requested that the company reveal their customers in order to ensure that any capital gains or losses are being reported correctly.

The advancement of digital currencies has finally reached a point where the government has recognized the need to develop a system of greater oversight. Untraceable transactions have provided an opportunity for users to hide capital gains and launder money. In order to prevent financial technologies from creating opportunities for fraud and tax evasion, the industry needs to work with legislatures to establish government oversight that is effective and does not impede the growth of financial technologies.

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Traditionally, wealth management services such as personal budgeting and portfolio management were only affordable to the wealthy. With the increased development of FinTech, these services are now available to consumers through finance applications and online marketplaces. FinTech companies are providing the average consumer the ability to receive these services at lower costs than from traditional banks.

The increased competition in the financial services sector has forced Banks to rethink their business strategy. Traditionally, banks offer checking accounts to customers at below market value in order to attract customers to their more profitable services such as loans. With FinTech companies providing the same services as banks at a lower cost, banks will need to reevaluate their business strategy and either increase the cost of their base checking accounts or acquire the growing FinTech companies.

From a consumer perspective, FinTech’s disruption to the banking industry could lead to greater costs for holding a checking account. The increased fees could bar lower income families from being able to access a transaction account. Overall, innovation in FinTech is rapidly affecting the finance industry and legislators need to ensure that this disruption does not lead to a detrimental effect on most consumers.

Reference:

http://time.com/3949469/financial-technology-boom/