Data Drivers

Bridging Blockchain’s Comprehension Gap

Bitcoin — and the technology that enables it — has certainly had a rather fast trip from obscurity to mainstream awareness. In January 2009, the so-called “Genesis Block” came into existence to the delight of an extremely small but very passionate cadre of cyber currency enthusiasts.

In the 8.5 intervening years, bitcoin and the blockchain technology that enables it  hasn’t quite gone mainstream. Your grandmother probably does not have her own wallet, but financial services professionals are aware of bitcoin.

And, to WEX’s recently released First Annual “Payments Pulse” Survey, it is a subject that is increasingly on the minds of CFOs around the United States, as they are looking broadly for more innovative and streamlined payments technologies.

For this week’s Data Drivers, Karen Webster dug into B2B payments changing the relationship with blockchain with WEX’s SVP of Corporate Payments Bob Sneed and Director of Vendor Enablement Mo Brown.

The key numbers this week are 66 percent, 50 percent and 35 percent.

Good News: 2/3 of CFOs Are Now Very Confident They Understand the Blockchain

The less than good news? Only about six of 500 CFOs surveyed for the report could think of any actual uses they specifically had for the blockchain. So they know what it is — they get it; they just aren’t sure what exactly they should be doing with it.

So is this a case of a bit too much hype confusing the story, Webster asked, since there is a tendency to hype the blockchain as the be-all and end-all of payments solutions?

Part of it, Brown noted, is definitely hype, since at this point no one really knows what bitcoin and the blockchain’s ultimate future in the payments ecosystem will be. But, he notes, the interest speaks to the bigger picture issue, which is that CFOs across the board are looking to fill gaps in areas of their businesses, like international payments, where inefficiency abounds.

“This is about more than the payment — though buyers and suppliers want paying a vendor in Hong Kong to be as easy as paying a vendor in Wisconsin. But this is also about the information transmitted between a buyer and a supplier.”

And, Sneed noted, this is also about trust. Though CFOs are increasingly aware of the blockchain as a method for moving funds and information, that doesn’t necessarily mean the trust is there to start incorporating it.

“Even though there is a ton of bitcoin money now, there’s no trust there. There needs to be an infrastructure set up that is trustworthy. It doesn’t matter what form of digital blockchain-enabled coin it is. It needs to be something that is internationally recognized and trusted as currency.”

Which, Webster remarked, is anything but bitcoin.

But trust — and infrastructure — take time to build. Which is why the second data point may be a bit … optimistic.

50 Percent of CFOs Expect the Blockchain Will Change How Accounts Payable Operates in the Next Year

Webster noted that for a group of people who mostly can’t think of a practical application for the blockchain, CFOs sure are optimistic about how soon it will change their business.

And, Sneed noted, that level of enthusiasm for change is unsurprising given the costs and fees associated with international payments.

“That changing the structure of those payments is a subject near and dear to their hearts is no surprise,” Sneed noted. “That said, I don’t see it happening in six to 12 months.”

The question and answer itself, Brown and Sneed noted, is very telling, because it shows a hunger among CFOs to take accounts payable from a fairly stagnant function in the organization and really begin boosting efficiency and possibly creating new monetization streams.

Then, is it, Webster posited, a call for help to problems that these CFOs don’t exactly see existing solutions providing?

“This does suggest a call to action,” Brown told Webster, though the action is not necessarily to run out and build a blockchain-based solution as the catch-all for merchants.

“Any time a CFO is looking at different things that are coming quickly into the market, they need to be totally sure that an organization has a solid foundation to support those changes. When they want to do new things with accounts payable, we, as solutions providers, need to be prepared for the blockchain as we need to be prepared for anything that is coming forward.”

Which leads to the final data point — about who it is the merchant customer trusts at this point.

39 Percent of Respondents Expect Processors to Lead Payments Disruption

The blockchain is one of many innovations that vendors can pursue — and a surplus of options can be a bigger challenge than a drought. Which, Brown noted, is why WEX’s relationship has evolved toward consulting and toward keeping their partners not just up on what can happen in payments, but also what is worth pursuing — and what isn’t.

“It’s our job to be up on things that are going to work, and what are the purple squirrels. Sometimes you don’t know what the purple squirrels are until you’ve done your research.”

Research, he noted, that often involves small batching testing and piloting — so that the ideas that can and will scale up go forward, and the purple squirrels can return to the wild.

“We built our system so that it is able to handle different payment modalities as they came up. A few years ago, that was limited to the check, ACH and virtual cards.”

These days, the options have proliferated, and what WEX offers is building the right foundation so that other payments modalities slot right in, and in accordance with customers needs.

“What it underscores,” Sneed told Webster, “is a need to be closer to the customer and understand what they need and want to accomplish and then accelerate delivery of a solution to the market.”

The blockchain could be something that delivers value as a solution — especially those hit hard by fees. It won’t be fast; both men agree this is going to take “a bit of time,” as international payments rails aren’t the kind of things that go up overnight.

“Over time I think you will see ... buyers and suppliers are going to get together and work this out when it comes to using the blockchain. If that happens, and they can say, ‘Look this worked,’ I think then you will see talk of building a blockchain supplier network.”

But the point isn’t making it go up overnight, WEX said. The point is being the trustworthy player that can slot in the blockchain whenever that supplier network is really ready to go online.

So even CFOs don’t know today quite how they want to use the blockchain. The good news is they have much more than a year to think about it — and lots of other infrastructure to build in the meantime.



About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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