Deloitte Explores Blockchain Tech for Client Auditing
Professional services firm Deloitte has revealed it is seeking to use blockchain technology to automate client auditing and crowdsource its consulting efforts, among other applications.
With the announcement, Deloitte – one of the world's 'Big Four' audit firms – becomes the latest mainstream financial entity to voice its interest in the technology, following announcements by banking giants such as Citi, UBS and USAA.
In an interview with CoinDesk, Deloitte Consulting principal Eric Piscini explained his company has been conducting research into the potential business opportunities around blockchain technology for 18 months.
"We started with a very specific mandate ... as a 200,000-person company, we need to understand more about the blockchain and the underlying technology. We believe it can really change the way our clients operate and how we operate."
Named the Deloitte Cryptocurrency Community (DCC), Piscini said the group has about 100 members in 12 countries. Its efforts have so far centered on communicating the potential benefits of the technology to banking and retail clients, while helping coordinate interactions between these entities and industry startups.
The DCC, he said, has three mandates: educate Deloitte and its clients on opportunities in the space, investigate how the technology could improve existing services and explore future solutions built on the blockchain.
The announcement follows written reports from Deloitte on various subjects including bitcoin's use as a money exchange protocol, a way to manage staff payments and the viability of a central bank-owned cryptocurrency.
To date, many of Deloitte's clients are still in the exploratory phase of the technology, Piscini said, with most still attempting to determine the differences between bitcoin and other blockchains.
Some, however, are moving to apply this technology to specific pain points, either to add additional revenue streams or cut costs. Piscini suggests a smaller percentage of clients have graduated to explorations of how the technology could be applied to specific business use cases.
"It's usually when they reach that third level that they start analyzing the technology stack and want to know how to deliver these businesses cases," he explained.
Piscini indicated that these clients are currently exploring different protocols built on top of bitcoin, including Blockstream, Counterparty and Factom. A key question that persists for many is whether to partner with these firms or build a private blockchain.
"We have clients on both sides of the equation, who say, 'We want to use factom, it's a good enough solution, they put an abstraction layer between me and the blockchain, I don't have to say that I'm using bitcoin, but I get the technology in the backend, the huge community, the huge mining network," he continued, adding:
"Some people are saying I don't want to do anything with bitcoin, I'm going to go with Eris or Ethereum, because I don't want to be associated with bitcoin in any way. Those are the two camps."
Piscini suggested Deloitte's New York banking clients, for example, were primarily interested in using the blockchain for the trade, transfer and settlement of transactions. Elsewhere, retail clients are interested in the use of the blockchain for rewards program management in a similar way as mobile gift card provider Gyft.
As for its own projects, Piscini said Deloitte hasn't determined one specific working thesis for the technology, suggesting the firm is willing to select the blockchain best for its specific use cases.
"Our point of view, is 'Let's find use cases, where you can generate more revenue, generate a different customer experience or cut your costs.' Then we can find the technology stack to address them," he said.
So far, Deloitte has launched Rubix, a software platform that allows its clients to build applications on top of blockchain infrastructure.
The official website for the service lists four areas of interest, including reconsolidation between trading partners, real-time auditing, land registry and loyalty points. Internally, the company is focused on automating some of its auditing processing via a solution currently in stealth.
"The solution we're developing using the blockchain will accelerate the audit process because that company would post every transaction in a blockchain. To audit a company, we would look at that blockchain and all the transactions but because the blockchain is immutable and time-stamped."
"It would accelerate the process and make it cheaper and more transparent and for regulators," he added.
Still, Piscini pushed back against the idea that the peer-to-peer (P2P) nature of blockchain technology will render service providers such as Deloitte obsolete.
"The potential for disruption is limited, but the opportunity is significant. The example we had earlier is going to change the way we do that, but we don't think we'll be replaced, we think we can be more efficient," he said.
In regards to its tax services, Piscini said it would likely gain business due to the lack of clarity still surrounding the technology. Further, he also sees opportunity in consulting.
"On the consulting side, I think we'll see the ecosystem adapt and change and move toward blockchain-based solutions," he continued. "The potential for us is around the ability to source consulting services through a P2P crowdsourcing platform. Instead of saying, 'Deloitte help us with that strategy', you can request that service on the blockchain and the blockchain would match you with the right individuals to do that."
Piscini added that this development is something the firm is "taking very seriously" given that consulting is increasingly an integral part of its operations.
Perhaps most notably given its vantage point as a mediator between startups and enterprise companies, Piscini suggested that these two communities have not yet developed steady communications.
More traditional companies, he said, still look at the tech community as "geeks" who may not understand the relevancy of the tech to their business. He also reported an equal but opposite reaction from startups.
"A lot of those startups don't have as much training yet and they don't know how to talk business with my clients," he said. "If you don't use the right terminology, you don't get to talk more than 10 minutes."
So far, this has resulted in larger companies making some "wrong assumptions" about the technology. For example, Piscini noted that it is still not proven whether blockchains can replace shared databases and be more cost-efficient.
"They're assuming that the blockchain is going fix a business or tech issue and they have some very high expectations. Sometimes we get back to them and say the blockchain will help you get there, but you should consider other options to fix that problem," Piscini said.
"The blockchain is becoming such a big buzzword people are trying to fix everything with the blockchain where sometimes it doesn't make any sense."
For example, Piscini cited cross-border payments as a vertical that will, long-term, likely embrace blockchain solutions, but that has compelling solutions today offering by companies such as Paypal and Xoom.
However, Piscini did express optimism that the dialogue is improving, spurred by the efforts of innovative firms such as Citi, JP Morgan and USAA, all of which have teams devoted to the technology, and the addition of financial industry veterans such as Blythe Masters to companies like Digital Asset Holdings.
"The expertise is moving into the tech because that's how they're going to be able to come up with the right solutions, but it may take years to get to a mutual understanding," he added.
Piscini also indicated that he still sees payments as being a vertical that will be influenced by bitcoin and the blockchain, even if enterprise clients are currently interested in the broader applications of the technology.
He suggested that, in Deloitte's view, bitcoin should be considered a technology for all transactions, including those that are not necessarily financial.
"Bitcoin is a technology that is interesting when you want to manage any type of transactions, it could be a transaction between me and you transfering bitcoin or asking a driver to pick us up at an airport," he said. "Today I'm using a ridesharing service, but tomorrow I might be using blockchain to do that."
Over time, Piscini said he sees the blockchain becoming a foundational layer for asset transfer, smart contracts and voting, but that different blockchains may be created that specialize in each of these use cases. He also suggested that he sees cryptocurrencies such as bitcoin will likely continue to play a role in the management of blockchains.
While Deloitte is working on more than 20 use cases for the technology, Piscini still cautioned that he doesn't know which opportunity might be the most immediate application of the blockchain, though he foresees a killer app being developed soon.
"At some point, you're going to have a killer app, you're going to have the AOL of bitcoin that does it well for some time, that company is going to make a lot of money."
Deloitte image via Wikipedia Commons
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