Emerging Technologies

How blockchain is addressing key problem patterns in the financial services sector

Image: Photo by Danielle MacInnes on Unsplash

Robert Crozier
Board Member, B3i; Head of Global Blockchain Centre of Competence Chief Architect, Customer Platforms, Allianz Technology
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Three years ago, I confidently declared that the global insurance industry was on the cusp of a technological revolution that would change how businesses operate and that blockchain technology would eventually transform the industry for the better. I was right –- but didn’t know how right I was.

For a time, attentions had focused on proofs of concept (PoCs) for bike theft fraud prevention, fake news prevention, international claims service and reinsurance treaty placement. Some of those PoCs eventually fell by the wayside and the world of enterprise blockchain went rather quiet. Some misunderstood that silence for a lack of interest in building blockchain solutions. In reality, those PoCs led financial services to see the real industry value for blockchain technology.


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In that silence, the financial services industry went about the business of evaluating the underlying business value and extending beyond the experimentation phase of ‘seeing what works’. This more structured approach allowed us to settle on the problem patterns offering the most relevant solutions and that were ripe for near-term adoption - patterns related to accounting and reconciliation that could drive true efficiencies and time savings. Addressing those problem patterns - and arriving at these innovations - would never have been possible without the collaboration blockchain requires.

Solutions for problem patterns

The problem patterns we identified were simple, common and probably occur in most organizations. Each have traits in common, specifically, duplicated data entry across multiple systems and processes. They include:

  • Mirrored processes. In large companies or industries with many players, the main area for opportunity is in what we call mirrored processes. Mirrored processes are a set of patterns that are duplicated across business units where teams of people and systems are doing exactly the same ‘stuff’. Two teams set up in each business unit to settle two halves of the same contract would be an excellent example.
  • Data reconciliation. The need to be absolutely sure that your data or understanding of a contract is exactly the same as someone else’s view on the same data is another challenge that should be addressed. Reconciliation, or, “I know what I see is exactly what you see”, consumes a lot of time and effort, especially in the financial services industry.
  • Compliance. Knowing your history is crucial in this industry, as players have to report the numbers, confident that they are correct, with an ever-increasing level of granularity. Strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulation demand this level of audit control when providing services for customers.

Versions of these challenges affect every company and are treated as a given. Some companies have set up dedicated departments to perform compliance or reconciliation for certain critical tasks that can’t be outsourced. (After all, when the future of the company, jobs, pensions, and sometimes even lives are at stake, you can’t just take another company “at their word.”) Blockchain / DLT features enables companies to have a shared version of the truth that can be trusted and acted upon, thereby reducing efforts on all sides to the benefit of our customers (and ourselves). Basically, it provides a better way.

Why addressing these problem patterns matter:

Blockchain and benefits to customers.
Tackling and resolving these issues allows the financial services industry to enhance the customer experience by reducing the time it takes to pay a claim. At its most basic level, blockchain can help insurers serve their customers better because it shortens the time necessary to get what they need when they need it. When we as insurers can reduce the complexity of settling a claim and speed up the process, it significantly reduces costly downtime for the customer, i.e. the time from the incident occurring to the time when the customer can begin rebuilding their operations. This can often mean a minimization of disruption to an individual’s ability to do their job and get paid, enabling them to continue providing essential support for their dependents.

In addition, by incorporating these maturing [blockchain] technologies, we increase the efficiency of operational processes across our own organization and reduce the incidence of insurance fraud and claim duplication. This ultimately lowers the cost of insurance for our customers. It also makes coverage more accessible to the underinsured, for whom it was previously financially prohibitive, particularly in the rapidly-progressing but still developing economies around the globe.

"Leveraging blockchain can offer a significant leap forward in terms of productivity, something which financial services providers traditionally struggle to scale."

Robert Crozier, Allianz Technology

Blockchain and its benefits to financial services institutions. The benefits of blockchain for customers underpin the benefits for insurers and the financial services industry more widely. Clear audit trails and the ability to monitor and audit financial transactions in real time enhance the ability of regulatory supervisors to ensure the stability of the financial system, which is, of course, also good for customers and economies that depend on that system.

With blockchain technologies in place, information can be distributed to the people who need it with the utmost protection of customer data. This technology also helps better detect claim duplication, reduce data error, and identify fraud.

From an operational standpoint, a new level of efficiency within targeted processes can be beneficial to financial services companies. Processes comprising 20 different tasks can be greatly simplified. Removing the fundamental need for over half of those tasks is not just business process optimization, but business process elimination, changing the way a process is carried out and representing a true digitalization - not just digitization - of the process in question.

As a result, leveraging blockchain can offer a significant leap forward in terms of productivity, something which financial services providers traditionally struggle to scale.

Blockchain, the ultimate team sport

Blockchain / DLT triggered a motivation or desire for like-minded individuals within companies to work together to solve common, long-standing problems, and share the creation, development, deployment, maintenance, and operations of solutions. In fact, collaboration is needed to take advantage of the true benefits that blockchain technology has to offer. Tackling the common problems faced across and between different industry verticals requires a coordinated approach that embraces collaboration between companies, as well as a wide range of partners.

Thanks to collaboration, companies have moved from playing with the technology to fully-funded scale deployments within their businesses. Companies such as Contour (trade finance solutions), B3i (risk transfer solutions), Insurwave, KomGo and W have created products based on blockchain technology, that others are willing to pay for. This will further drive adoption.

We are in a new phase of collaboration: If you wish to participate in the success and reap the benefits of collaboration, each player must sign up to certain obligations to the network as a whole. This is often referred to as coopetition, i.e. peers working together on shared problems to the benefit of the customer, which allows the dedication of more resources to differentiating behaviors, such as customer interaction and service. It’s a concept that’s quite new to many companies: Getting comfortable collaborating with peers doesn’t exactly happen overnight.

Distributed ledger technology is often referred to as a team sport, which is why we at Allianz were happy to contribute to the World Economic Forum’s Blockchain Deployment Toolkit. B3i and other consortia have also shared their insights and lessons which are captured in the toolkit. It allows participants to take advantage of blockchain technology by balancing the benefits, which often include collaboration with peers to create decentralized, networked solutions to solve shared problems, while also protecting individual competitive advantage and keeping sensitive data confidential.

It’s difficult to overstate the impact that embracing these new ways of conducting business will have on the financial services industry. This is evidenced by the remarkable efficiency gains demonstrated by initial results. In some cases, [complex] claims’ settlement times have been reduced from weeks to hours or even minutes. These results are due to companies’ sharing of standards, infrastructure, and operations of the platforms that they interact across.

We need to consider the profound impact of this collaborative way of working in service of our customers, both existing and new, and make use of the features of blockchain to improve customer service, increase trust, and finally solve some long-standing - dare I say it - legacy problems that have plagued the financial services industry for many years.

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