How Blockchain and Bitcoin Can Disrupt the AP Process — In a Good Way

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Spend Matters welcomes this guest contribution from Laurent Charpentier, chief innovation officer, Yooz Inc.

Blockchain. Cryptocurrencies. Bitcoin. These are certainly hot topics in today’s daily business news. It’s all still a bit of a mystery to most of us. It started with bitcoin (a cryptocurrency) in 2013 and the idea of a digital currency used to buy anything from music to cupcakes couldn’t have been more exciting — or more timely — as technology continues to advance at lightning speed. And blockchain is the platform used for verifying and recording transactions that’s at the heart of bitcoin, and is considered as having the potential to reshape the global financial system, among other industries.

Financial professionals and the consumer alike are skeptical, even a bit afraid of it all, and we wonder how far this will go. Recently Jamie Dimond, CEO of JPMorgan Chase, received a lot of attention on the financial news outlets for calling bitcoin a fraud, and that comment has sparked much debate. But when we think about earlier disruptive technologies, consider, for example, PayPal. It was brought to market during the times when consumers could not imagine money transfers outside of their bank accounts. It expanded rapidly from its inception in 2000 to 2005, when it became a widely adopted and trusted form of transferring money and making payments. It remains so today.

One year ago, bitcoin’s price opened at $702 and it closed as of this writing at well over $16,000, with a total value of $185 billion. That’s more than a 1,000% increase! And the value continues to rise daily.

So, yes, people and businesses are using bitcoin as a cryptocurrency or investing in it, certainly taking it seriously. Some are becoming wealthy with it. Companies are starting to embrace bitcoin as a form of payment, even Fortune 500 companies like Microsoft and Intuit. The question now becomes, how do we continue to measure the value of bitcoin in relation to money? And beyond that, how do we see it shaping the business world? Even our personal world?

When you think about blockchain as a way for businesses to manage transactions, more than 100 banks including Barclays and JPMorgan Chase have joined the R3 consortium, an operating system for financial markets with a ledger/blockchain platform to track money transfers and other transactions. The use of blockchain by banks and other companies is secure with new forms of encryption that can keep transaction details private while allowing a network of users to verify them. Nasdaq is also using blockchain for trading securities in private companies.

I can see it being applied to the procure-to-payment (P2P) workflow one day. An important part of the process is matching an invoice to the PO. That can also be the step where delays or errors happen. With this platform, the records are all stored in the blockchain, and the provenance, authenticity and accuracy of these records are guaranteed. There would be no need to check an invoice against a PO. It might even eliminate the need for an invoice eventually. Blockchain can be a smart contract between trading partners and also help the financial operations team become more strategic. It can also connect vendors to buyers and customers to business.

At Yooz we’re already doing much of that with our cloud-based AP Automation solution, helping companies evolve from a manual, paper-laden process to a digital, fully automated workflow. From there, going from digital to blockchain doesn’t seem like such a huge leap.

There are other industries and companies that I see being the next big adopters. I read how Wal-Mart is using blockchain to manage food safety in its supply chain. This indicates that any business with global shipping and logistics can benefit. I project advertising and real estate will be two others. And, of course, crowdfunding, which has become a popular way for small businesses, start-ups and causes to fund a project or venture by raising many small amounts of money from a large number of people via the Internet.

Entire processes can be tracked in one blockchain ledger. One day maybe even replacing a company’s books.

Once the issue of regulating bitcoin as a form of currency is resolved, there is also potential for a common global currency. Think about it. Now, when you are transferring money internationally, for example, you need a lot of information — the other party’s bank account information, exchange rates, and data and fraud protection. All of this is solved by blockchain. It can disrupt our reliance on traditional banks. Would we even still need banks?

We are operating in a global economy bogged down by so many different types of currencies and bank regulations from country to country. This could streamline business transactions across nations. It’s fascinating to imagine what a new world bank would look like.

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