Can the security, efficiency, and speed of blockchain technology be as transformative to business and individuals as the internet? Some analysts see blockchain having the power to reorder and transform everyday transactions for both businesses and individuals.
HBR describes blockchain as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” Blockchain frees the ledgers of transactional records from the constraint of centralized registration and control, and limited access, much as the internet freed communication and information from centralized control. Think email versus the post office, or Amazon vs. the department store. Moreover, blockchain has the potential to replace the trust-providing function of traditional institutions like banks and escrow agents with a trusted technological approach.
Financial institutions like credit unions, are saddled with multiple layers of legacy systems, which create inefficiency, risk and excess cost. Institutions are actively exploring state of the art blockchain deployment to leapfrog this constraint. The R3 Consortium is developing a distributed ledger platform for the commercial banking industry, and has been joined by over 100 banks, technology companies, regulators, and others. R3’s blockchain records will be distributed among the network of computers participating in the system, and accessible to those with qualifying permission.
Credit unions are following a similar, but independent path. Last year, a number of credit unions and their umbrella organizations have made significant advances in the use of blockchain technology. In August 2017, the CUSO CU Ledger LLC, was formed to offer a way to participate in shared-ledger technology. In October NAFCU joined Hyperledger, an open-source blockchain collaboration hosted by the Linux Foundation.
The cost effectiveness of blockchain can set up a dynamic where the smaller, nimbler and smarter participants might prove more adept at succeeding at its goals more quickly. The Credit union focus on individuals could be a deciding factor in the credit union industry bringing this technology to market first.
Blockchain technology offers the credit union industry a high possibility of dramatic industry change, including lower cost and improved service. But what is the role of of leaders to prepare? First of all, educate yourself and your team about blockchain’s potential. For credit union board members and those in or near the C-suite, this education allows you to participate in forward-thinking strategic conversations. Your organization needs a strategic roadmap for capital investment and technological implementation for blockchain systems. Leaders must avoid the risk of having dramatic change on the horizon and not having a plan to traverse the terrain ahead.
Understand what digital skills and capabilities exist within the senior team and are readily accessible. Credit unions already have a repository of useful and pertinent information, and starting there can help get blockchain conversations on the table. The CEO, must assure that regular conversations occur among board members and senior managers about what’s happening in the field, and where the organization is situated and heading. Projects that utilize blockchain technology, especially those involving members and the public, can’t rest exclusively in the hands of the IT Department and technologists. Leaders must assure the user experience is simple for employees to implement and members to use in order to drive rapid adoption.
The employee’s role is critical as well. Steering your organization through the uncertainty of such a potentially disruptive technology needs alignment at all levels of the organization. And remember that reputation is everything. In the future, reputation systems built on blockchain technology may serve as an enduring witness of an organization or individual’s behavior. Ledgers that used to be a system of accounting for business can become a record of accountability and trust.