Thursday 5 May 2016

Regulators will hug their blockchains – takeaways from Consensus 2016

"Show of hands, how many people don't know insurance at all?"

I attended the blockchain (BC) conference Consensus2016 this week and came away with some very different perspectives about the technology and its market. The ability to immerse myself in the subject and hear multiple points of view and varied examples of projects was extremely valuable. Here are my highest level takeaways along with some general observations.


Specific take-aways:

Regulators will love their blockchains
The transparency and audit trail capabilities of BC will reduce frustration, lower costs, and increase the effectiveness of regulators. Delaware’s announcement to move selected regulatory processes to the BC is an early recognition of this potential.

Benefits beyond the technology
The power of BC to eliminate counterparty risk, stop reconciliation, increase efficiency were discussed repeatedly, but I also noted more subtle, nuanced, and powerful benefits related to the development process around BC. The most significant examples are the benefits that arise when multiple organizations partner to build a shared BC. Two specific areas are the joint development of the automation for contracts, and cross-organization agreement on data definitions. I am now looking at BC with one eye on what the tech delivers and one on what the process around it yields. I will blog in detail about this next week.

Nascent, but sufficient to test with
No doubt the platforms will continue to develop, but based on reported activity in capital markets, banks and insurers, the tech is ready for corporate testing. One insurer offered an intriguing insight based on their experience to date. They found as they started POCs, their use cases all dealt with processes which already have existing automation solutions in place, with the goal of efficiency/cost improvements. However, they found that they were not getting traction/attention from their senior executives that they expected and needed. They have since pivoted and are now focusing their BC testing on problems that do not currently have automation solutions in place. (by the way, this insurer is another example of a firm which is using its innovation infrastructure to execute their BC tests. They are being done in their innovation lab under the governance in place for experimentation projects — see my previous blog about a similar approach taken by John Hancock.

General observations:

There are strong emotions associated with this technology. The use cases that deliver financing and banking services to developing economies, or that improve health care, certainly warrant an emotional reaction. However, when I hear comments like “BC technology’s impact will be as significant as the railroad in the 1800s,” my hype goes off. I suppose I haven’t been indoctrinated yet, but neither have the majority of financial services executives.

Market transition
Suppliers are changing from geeks to suits, from startups to more established tech and consulting firms. In some comments during a number of presentations and occasional tweets and audience reactions, I detected a curious, and unhelpful, undercurrent of antagonism towards this shift. Because of the promised benefits, the economics of BC will inevitably move to the enterprise. In fact, its full promise cannot be realized without this change.

Kudos to the organizers Coindesk for developing a solid, varied program and for executing it well.

from Insurance Blog

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