Glowing blue and yellow spots which rise up in a line

Blockchain or “E Pluribus Unum”

The potential which distributed ledger technology offers for banks and insurance companies

November 13 2020Christian Lanzendorf

A few bitcoins here, a few crypto custody transactions there, and now the electronic security. Apparently the sector is lacking the passion and psychological stress necessary to consistently convert the potential of the technology into process optimization and new business models. More or less like 25 years ago. The internet was new. The number of use cases was minimal – really just email. In those days there were also just a handful of courageous people and, first and foremost, everything revolved around what could be done with the technology. The whole bitcoin discussion brings back memories of the great “revolution” which materialized in spam mail.

It would seem that the bright spark is still missing

Virtual representation of the bitcoin sign

What potential does blockchain offer for banks and insurance companies? When will the Bitcoin foe become a friend that will allow new business to be generated (crypto custody transactions)? Is the technology only of interest for its cost case or is there potential to generate more revenue? Does it change the nature of collaboration with business partners? To what extent can value chains be expanded horizontally and vertically or, if not, how can they be better monitored? Not every question has a clear answer, but one thing is clear: The regulatory framework needs to change before the distributed ledger technology can successfully achieve widespread application. 

Keyword “electronic security”

Up to now, companies issuing bonds, promissory notes, or commercial papers in Germany have had to have a global certificate drawn up. This securitizes the rights of the creditor and is lodged and signed in paper form in the vaults of central custodians such as Clearstream. Not only does this make the process of issuing shares more laborious, it also prevents the fully digital handling of financing processes in accordance with German law. The regulatory legislation needs to change to allow a “digital security protocol” based on blockchain to be used. The bond needs to be “dematerialized” and a digital copy recognized as a replacement for a physical certificate. 

We are sure that blockchain technology is particularly suited to acting on value chains in an integrative way, reducing the costs of all members of this chain and significantly accelerating processes.

A graphic example of the “pharmaceutical industry”

Two hands hold a syringe and a medical vial containing a blue fluid

Integration, cost reduction, process acceleration in an example spanning sectors: a European pharmaceutical manufacturer has a temperature-sensitive drug (e.g. a vaccine) manufactured in India for sale/prescription in Germany. As a minimum, the following parties are involved: 

  1. Pharmaceutical company
  2. Indian contractor
  3. Logistics company
  4. Customs authorities
  5. Bank and
  6. insurance company.

We all know the classic process of a drug's journey. Here are just a few points to show the massive cost-savings potential and the integrability in conjunction with time savings: transfers of risk, throughput times, stopping points, temperature thresholds, compulsory coverage, hedging, forms of contract.

Summary and call to action

Summary: Imagining blockchain from the viewpoint of our own company falls far short of the technology's potential. Its whole charm arises from the basic consideration of cross cooperation and collaboration and the motto of “one out of many.”

Call to action: We are looking for banks and insurance companies, which are familiar with these or similar use cases in their everyday business, to develop a smart solution together with T-Systems and a business partner, such as a pharmaceutical company, as part of an innovation workshop and then, where appropriate, to implement the technical side in conjunction with us.

About the author
Portrait Christian Lanzendorf

Christian Lanzendorf

Account Executive , T-Systems International GmbH

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