Blockchain – How far can business process automation go?

Bitcoin is now eight years old, but finding real economy uses for the underlying blockchain technology has been slow. However, thanks to the rise of Ethereum, the largest computing platform for blockchain technology, and more industry-focused start-ups and consortiums such as Ripple and R3, blue chip companies like Walmart and Santander are beginning to understand the value of blockchain. The core driver of this interest in blockchain is the ability to reduce logistical costs, prevent fraud and eliminate legal disputes through a transparent, immutable and decentralized record of transactions.

Microsoft has also launched its blockchain-as-a-service product, Ethereum Consortium Blockchain Network, making the technology accessible to the mass market and helping industries work more easily together.

What is blockchain? ƒ

  • Blockchain (distributed ledger): An enormous database that enables the creation of a digital ledger of transactions to be shared among participating parties. Transactions must be verified and approved against each party’s stored copy before it can be added as a permanent record. ƒ
  • Who makes the decisions? Each blockchain is underpinned by a “smart contract,” which holds the rules for processing any transactions made between participating parties. ƒ
  • What is a smart contract? A contract written in software code.

No software is iron-clad

Knowing that there is a solution to software bugs in smart contracts is crucial for the development of blockchain technology

As a new technology, questions regarding security and transparency of blockchains have hampered more rapid adoption. Like all software, smart contracts are prone to bugs and vulnerabilities that hackers can exploit.

Recently, a hacker exploited a loophole in the smart contract of an Ethereum-based capital venture fund, known as a decentralised autonomous organization (DAO), which led to the theft of ether cryptocurrency. To mitigate the risk of fraud, the company held all transacted currency for a month before paying out, enabling it to implement a “hard fork,” a protocol that makes previously invalid blocks and transactions valid, and requiring all users to upgrade. Because of the implementation, investors’ losses were restored and the smart contract was updated.

This event revealed that blockchains are not immutable to risk, but can be amended if all parties agree to a change. Knowing that there is a solution to software bugs in smart contracts is crucial for the development of blockchain technology, as the inability to fix these bugs would surely alienate most businesses. However, the risk of loopholes in smart contracts somewhat undermines the argument that blockchain offers security through immutability. In fact, the U.S. Financial Stability Oversight Council (FSOC) warned of the possible risk of fraud if a small group of financial companies were to engage in collusion against the remaining parties.

As a new technology, creators of smart contracts must rely on a relatively small pool of examples to write new ones, leading other smart contracts to the same vulnerability as DAO. Moving in this direction before vulnerabilities are discovered could expose early adopters to very costly learning experiences, but the long-term cost of fixing vulnerabilities will be much lower than the labour cost of processing and managing large amounts of transactions. Santander estimates that blockchain technology could cut the costs of processing cross-border payments and regulatory compliance by up to USD20B annually by 2022.

Changing to a new system is time consuming and requires agreement on a myriad of issues between parties, including regulators who have traditionally been slow to adapt to new technologies. Thus, the application of blockchain technology in the financial sector, the area where there is the biggest hype, is just beginning to take shape: ƒ

  • Barclays executed a global trade transaction over blockchain technology in partnership with start-up Wave in September 2016. ƒ
  • Santander piloted use of distributed ledger technology to process international payments through a mobile app, which can connect to Apply Pay, in June 2016. In September, Santander confirmed that it was working with on a project to allow customers to convert money from their bank accounts into Ether on a live public blockchain. ƒ
  • Bank of America Merill Lynch, Royal Bank of Canada, Santander, UniCredit, Standard Chartered and Westpac Banking Corp are the founding members of Global Payments Steering Group, which has partnered with blockchain start-up Ripple to develop a rules-based blockchain payments network. ƒ
  • Monetary Authority of Singapore announced in November 2016 its plan to launch a pilot project with the local stock exchange and eight local and foreign banks to use distributed ledgers for interbank payments.

These early moves show a promising level of cooperation between financial institutions, regulators and financial services blockchain software companies; however, the application of blockchain technologies in financial services is limited for the following reasons: ƒ

  • Every node processing transactions must have total transparency, which will make it a deal-breaker for more sensitive services where a centralized database can offer greater security. ƒ
  • Every node must keep a record of every transaction. Processing high frequency trading services on blockchain would consume too much computing power to be efficient, at least in the near term.

Will DAOs replace traditional businesses?

The bigger risk for companies across all sectors is that new DAOs will compete more effectively against established market players that rely heavily on people for logistical, legal, human resources and customer services management. A DAO can leverage multiple smart contracts to manage agreements with multiple stakeholders, functioning automatically without a need for human intervention. For instance, the company,, uses smart contracts, distributed ledgers and the internet of things (IoT) to allow users to rent anything to anyone, processing all the lending and insurance agreements on the Ethereum blockchain.

A DAO can leverage multiple smart contracts to manage agreements with multiple stakeholders and other similar ventures will not necessarily replace players in the sharing economy, but may instead gain traction by partnering with them to improve the logistics of their businesses, benefiting existing businesses and consumers. In a more traditional example of partnership between software provider and customer, Walmart will implement a blockchain platform developed by IBM to manage its supply chain for pork in China to improve transparency and address issues relating to food safety in the country. In these examples, blockchain technology is helping to make existing systems more efficient, but it is not unrealistic to think that independent DAOs, or decentralised autonomous corporations (DACs), would be able to eliminate the need for the lawyers, accountants and bureaucrats whose role it is to confirm the trustworthiness and legal standing of contracts between parties.

Blockchain technology is also being considered for identity and personal data management. The ability to use blockchain to restrict access to identity or medical data to “trusted gatekeepers,” such as notaries public, lawyers, governments, insurance providers, is an attractive prospect in a world where it is difficult to confirm the use and authenticity of personal data. This is exactly what Ethereum start-up KYC-Chain aims to do.

It is also believed by some that the ability to keep personal data private without having to exclude yourself from social networks and other online activity could have a major disruptive impact on internet companies like Google and Facebook that rely on individuals’ data to power their advertising models.

Organizational and people implications

Blockchain has the potential to have a profound impact on organizational design, people, and how organizations view themselves. As work gets disaggregated and artificial intelligence replaces some “brain-based” roles that were historically considered less susceptible to automation, blockchain can hasten the emergence of the networked organization, reduce transaction costs, drive greater efficiency and require fewer layers in the organization.

In addition, blockchain has implications for traditional finance and accounting functions, such as accounting and treasury, to rethink how people conduct their work and the need to develop new skills that will enable them to engage with blockchain. Organizationally, it could also result in the creation of new roles or a new function that sits across IT security, finance and accounting.

Finally, business leaders will need to better understand the potential of this technology and the impact it has on the ecosystems they lead.


The “killer apps” for blockchain technology have finally started to take shape, though it remains to be seen whether the technology is flexible and secure enough to live up to its potential as a huge time saver in processing legal and financial transactions. The vulnerability in Ethereum-based DAOs smart contracts highlights a risk that many new adopters of distributed ledgers will face, with other snags likely to emerge as the platform grows. But the bigger risk is that the technology will evolve to supplant businesses as we know them. Borrowing from Bill Gates, although blockchain may not overhaul businesses in two years, we should not underestimate what it could do in 10.


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This post was co-written by Shankar Raman. Shankar is a Director with Willis Towers Watson. With close to 20 years of experience, Shankar has helped organizations around the world improve performance and accelerate growth through more effective strategy execution and capability development.

About Tom Srail

Tom Srail is Regional Industry Leader for Willis' Technology, Media and Telecommunications practice, based in Medin…
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