Enabling Real Time DNA
Most of us working in large organizations have always felt the presence of virtual walls between different businesses, platforms and systems. Despite having a common goal and sharing the same transactions life cycles, systems still operate in silos by processing and distributing data in different ways and formats.
This results in a big problem of coming up with the golden copy of data which is achieved through an expensive, delayed and inefficient process of Data Reconciliations.
As the world is moving towards shortening of the settlement cycles and fixing the breaks as they appear and not after the cut offs, this process has become even more critical. Real-time or near-real time processing support has become crucial as reconciliation technology expands beyond books and records to support cash management, risk management and trading.
IS BLOCKCHAIN THE ANSWER?
One of the most exciting technologies that has emerged in recent years is Distributed Ledger Technology, aka Blockchain. Blockchain’s ability bring transparency and data harmonization to existing disjointed and inefficient ecosystems revolutionize the way banks deal with data reconciliation.
Gartner forecasts that blockchain will generate an annual business value of more than US $3 trillion by 2030. It is possible to imagine that 10% to 20% of global economic infrastructure will be running on blockchain-based systems by that same year
Blockchain is a great enabling technology that can solve problems affecting all organizations by providing transparency, security, and trust in transactions.
Blockchain offers three core benefits in the reconciliation process which are difficult to achieve through traditional technologies.
o Real time data validation through smart contracts. As soon as the transactions are received from network members, smart contracts are executed on every node to make sure the transactions are matched/alleged or mismatched before blocks are created. This ensures transaction level reconciliation of data.
o Common view of the transaction’s status through Distributed Ledger. Every network member gets access to their copy of ledger which is in complete sync with other ledgers. Users of all the member systems have full transparency of the reconciliation data sets in their nodes and all members own the same data. There is no need to rely on a third-party database or system to view real-time status of data reconciliation.
o Immutable, permanent audit trail of transaction processing. A blockchain is designed to be immutable. The trust established between network of blockchain network ensures that data is legitimate and validated by every participant of the network.
Blockchain is about data governance and process change and not just implementation. It represents a total shift away from the traditional ways of doing things. This even goes for industries that have already seen significant transformation from digital technologies.
This poses a great challenge but also offers a huge opportunity to impact an organization by enabling standardization of data across the board with real-time transparency.
Foundational technology of Blockchain has a much wider impact than just providing a better reconciliation tool. Rather than just looking at making reconciliation better, Blockchain addresses the core issue of why it is even needed. Ironically as it may sound, once implemented, Blockchain will ensure that all the systems are getting reconciled in background in real time, hence eliminating the need of a committed and centralized reconciliation process.
The responsibility of keeping a book of records in sync will be shared among participating members through smart contracts and a shared ledger which is a golden copy of the records, hence enabling real-time processing as the core of the organization’s DNA.
Vincilium’s flagship product BlocRecon comes with preconfigured smart contracts, quorum-based network and a framework to transform any post-trade ecosystem into a frictionless Distributed Ledger Network.