Blockchain ain’t what you think it is, don’t get caught up in the tech

• Focus on operationalising blockchain and not on technology per se
• Asean FSIs have potential to lead the way in standards formulation

 
THE financial world continues to be excited by blockchain technology, but this excitement should be tempered by an actual understanding of its potential and its challenges.
 
Indeed, Software AG’s global industry vice president Sven Roeleven (pic above) believes that companies today may be too focused on the technology itself, instead of how to go about “operationalising the technology” and deriving true benefits from it.
 
“In conversations we’ve had within industry circles, including our customers, we find a lot of them have not yet thought about how to operationalise blockchain technology,” he says, speaking to Digital News Asia (DNA) in Kuala Lumpur recently.
 
“Companies at the moment may be just too focused on the technology and the publicity it gets as one of the hottest trends around, and they may not be thinking holistically about the benefits that blockchain can bring to their operations,” he adds.
 
Blockchain is a type of data structure that allows the identification and tracking of transactions digitally, sharing this information across a distributed network of computers. The distributed ledger technology offered by blockchain provides a transparent and secure means for tracking the ownership and transfer of assets.
 
Noting that it is very easy to be mesmerised by the promise of blockchain technology, Roeleven believes the key to the successful implementation of the blockchain is to understand how it forms a part of any organisation’s strategic digital transformation journey, especially in the financial services industry (FSI).
 
According to Roeleven, many banks today are already involved in some kind of digital transformation programme.
 
So if a bank wants to consider blockchain technology, it would be logical to fit this into the overall digital transformation strategy and think holistically about the benefits it brings to the whole strategy, he adds.
 
Secondly, digital transformation, and by extension blockchain, is not something a bank can roll out in a centralised manner, he argues.
 
“When embarking on a digital transformation project, typically banks need to engage in an agile way – that is to decentralise processes, co-innovate with customers, and do it in a small scale manner.
 
“If the project fails, quickly start again; if it succeeds, quickly move forward and implement,” he adds.
 
Upon succeeding, organisations need to think about how to operationalise the entire project and integrate the technology or project with existing infrastructure, processes, and governance structures, Roeleven advises.
 
“If a bank rolls out some kind of blockchain technology separately, then it will not work.
 
“There is a need to think about how, for example, this move connects with existing enterprise resource planning (ERP) systems, how to integrate this into processes, and how governance is handled,” he adds.
 
At the end of the day, blockchain technology can not only save FSI organisations money through the elimination of middlemen or central parties – as in the case of foreign exchange transactions – but also in terms of lowering the cost of operation because there are fewer processes in play.
 
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“For example, in the exchange of foreign currency, blockchain can eliminate the central party and the transactions can be more transparent and faster,” says Roeleven.
 
“But in doing so, existing processes can also be optimised and eliminated where possible, thereby saving banks more money.
 
“Still, to do so, banks would need to figure out how to integrate the blockchain into existing processes, take out those that are not necessary, and introduce new ones that make blockchain work,” he adds.
 
Asean could lead
 
When asked about blockchain technology adoption within the Asean region, Roeleven (pic) says a lot of FSI organisations are in “discovery mode.”
 
“Based on the conversations Software AG has had, a lot of banks have not thought that far ahead. They may be thinking about the blockchain, but they have not gone beyond how to implement it,” he says.
 
Roeleven also argues that blockchain development is being led by the bigger, regional banks and that generally speaking, the technology is still “pretty immature” in the region.
 
However, he also notes that in Malaysia, Maybank Bhd and CIMB Bank Bhd have already started their blockchain journey.
 
Despite the generally immature level in the region, Roeleven believes that Asean still has the potential to take the lead because the development of blockchain standards is still fluid and not monopolised by Western countries as with other technological standards.
 
Big banks in Asia could be the ones developing the standards or setting the reference that at the end may be the standard, he says. “This is why it’s so important for us [Software AG] to engage in co-development with banks in the region here in Asia.”

It would be hard to say when blockchain standards will be developed and accepted by industry, according to Roeleven.
 
“It’s not just not about coming up with a set of standards but more about discovering, through innovative small projects, what the best practices should be, which in turn could be used to develop a new standard,” he says.
 
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