LAS VEGAS -- Many treasury and finance executives have trouble understanding how blockchain is applicable to them. Wednesday afternoon at MRC Vegas, Andreas Suma, vice president, global product leader for fraud/data with ACI Worldwide, provided some insights.
Smart contracts are computer protocols that are designed to execute contract terms. If a certain condition is met, then a certain action occurs. And they have legal weight. “It’s a substitute for, or a compliment to a legal contract,” Suma said. “But it executes automatically. Coding is injected or captured into the blockchain and stored. Once it is there, it cannot be altered. It is recorded into the electronic ledger. That distributed ledger is then sent out for all to see and understand. That statement, with legal weight, is now out among all parties that are sharing. And once it’s executed, it is recorded there. And as a result, everyone has that transparency.”
Suma believes that smart contracts have massive potential in the retail space. He provided an example of a proof-of-concept by Visa and DocuSign that would allow for the rental and leasing of automobiles using smart contracts. After the consumer enters the car, they are immediately able to execute the agreement, through a blockchain. Suma noted that when he first heard about this, he thought it made sense for a quick rental contract, but he wasn’t sure about a long-term lease. “But as I thought about it, who really goes back into the office and goes through the 30-page contract in detail?” he asked. “For the most part, we want to know the price, conditions, terms and duration. If you’re comfortable, you’re ready to execute. And again, the smart contract allows you to accept that contract and transfers the rights of the vehicle to your name under the conditions of the contract.”
Digital currency and fraud reduction
Just three years ago, Overstock.com made headlines when it announced it would accept bitcoin. Now more than 150,000 merchants accept the virtual currency. But while bitcoin received something of a bad reputation due to some illicit actors using it in its early days, Suma maintains it can help e-commerce retailers reduce fraud in international transactions. “If it’s properly registered on the blockchain, it minimizes your risk from that perspective,” Suma said. “It also has a lot of back office efficiencies in terms of not having to do the currency conversion or the foreign exchange risk.”
Blockchain’s transparency also can provide consumers who shop online the opportunity to authenticate goods. “So high-value products such as Tiffany’s jewelry could be authenticated by how they’re registered on the blockchain platform, so it minimizes your risk of buying a counterfeit product,” he said. That authentication process in turn benefits the merchant because it enhances the customer experience.
From a recordkeeping standpoint, blockchain has many uses cases, one of the biggest being supply chain optimization, Suma explained. Last year, Wal-Mart, IBM and Tsinghua University came together to address food safety concerns in China around pork products. They began digitally tracking the movement of pork on a blockchain. “They were successful and were able to feel comfortable presenting consumers with the products that were coming from their supply chain,” he said. “It was so successful in China that they’re doing it with several products here in the United States, like produce.”
Pre-blockchain, if an E.coli outbreak were to occur, Wal-Mart would have had to yank all of its products off of its shelves, everywhere in the region where it occurred. But with blockchain recordkeeping of the entire supply chain, if there is an outbreak in a certain area, Wal-Mart can quickly go to the electronic database and track that back to the farm where it happened. “They can find out where that distribution was—to what region, what cities, what stores, and pull it,” Suma said. “That introduces significant efficiencies internally, but also protects their brand and their consumers. We see that as being very transformative.”