Businesses of all sizes feel the pressure to innovate and cut costs, but digital transformation isn’t as agonizing for large organizations as it is for small and medium sized businesses (SMBs). A bigger player with deeper pockets can spend more on technology upgrades without fearing the slightest hiccups.
It doesn’t take a genius to see that innovation can give companies of any size a competitive advantage. But SMBs must innovate with fewer resources at their disposal if they want to keep up with larger competitors — and grow.
Growth and innovation are strongly correlated in the SMB sector, as 40 percent of fast-growing SMBs consider innovation one of their top priorities, according to an SAP-sponsored IDC study. Blockchain is an innovative technology that can deliver transformative change for SMBs.
Blockchain Goes Mainstream
A blockchain is a digital record — or ledger — of transactions shared across a distributed network. Transactions link together in “blocks” of information, creating the blockchain. After network authentication, each account and user works within specific security parameters, which algorithms set and verify.
- Medical patients could share their electronic records with researchers or pharmaceutical companies for a controlled period, such as a course of treatment or a drug trial. Patients could also share encrypted health information with multiple providers without the risk of privacy breaches.
- Transportation and logistics players could negotiate coverage by sharing criteria such as risk, route, weather and vehicle type via a blockchain-based insurance market.
- Consumers could use blockchain to manage fractional ownership in autonomous cars.
- Voters could cast ballots via smartphone, tablet or computer, resulting in immediately verifiable results.
What Blockchain Means for SMBs
Blockchain offers a built-in mechanism for trust, combined with finality of transactions for improved processes. Transactions can be run and approved automatically in seconds or minutes, reducing costs and boosting efficiency.
Once a block of data records on the blockchain ledger, it’s extremely difficult to change or remove. When someone wants to add to it, participants in the network run algorithms to evaluate and verify the proposed transaction.
So blockchain offers increased transparency, accurate tracking and a permanent, secure leger. It can cut out transactions involving middlemen, such as banks and other financial service providers who often charge costly international fees.
Cutting Costs Across Borders
Blockchain could also be a positive disruptive force for SMBs that do cross-border business, offering an alternative to the hefty fees associated with international wire transfers. Circumventing a major bank or FX provider with blockchain can lead to an immediate increase in efficiency.
Currency exchanges can occur in real-time, eliminating the correspondent bank’s FX conversion process — while converting and depositing money into the beneficiary account quickly and without any extra deduction or fee. An international blockchain payment last summer moved CA$1,000 (€667) from Canada to Germany, executing what would normally be a two- to six-day transaction in about 20 seconds.
Blockchain is still an emerging technology, with many R&D centers working on new possibilities and innovative uses for the technology. But early indicators suggest that SMBs armed with blockchain can take greater control of their financial independence — and that’s just the beginning.
We are not yet in the era of blockchain, but we are getting ever closer. It has come a long way since its first implementation in 2009, and the technology represents the next link in the innovation chain for SMBs.