It can transform accounting, collaboration with your clients and data analytics, among other things: The potential of blockchain technology in the fiduciary sector is great. How can blockchain specifically help fiduciary companies strengthen their position in the market? In this blog post, you will learn what competitive advantages the Blockchain can give your fiduciary company.
According to financial and technology experts, blockchain is likely to completely transform the provision of accounting services as well as auditing and tax advisory services in the next few years. In the next sections, we summarise the five key competitive advantages that blockchain can bring to your fiduciary business.
Reading tip: In part 1 of our blockchain series you will get an overview of the decentralised technology and in part 2 you will find use cases of blockchain in the trust sector.
Competitive advantage 1: Expanding the range of products
In the future, only those fiduciary companies will survive that offer their clients added value in the form of individualised and transparent services. Instead of classic accounting services, services such as liquidity planning, cash flow management or risk management are increasingly in demand. In order to meet these new client expectations, fiduciaries are dependent on efficient data evaluation and reliable figures. The blockchain allows faster and more tamper-proof data analysis than ever before. This will be crucial for fiduciary companies in the coming years, as demand for individual reports and analyses is steadily increasing, according to a study by Accounto and Treuhand Suisse. In addition to the increase in productivity in data analysis, the blockchain also enables greater reliability and data protection: the data in a blockchain is tamper-proof and can be viewed by all parties with a signature key at any time and in real time. This means that trustees need to spend less time tracking down documents or figures and preparing reports. If your trust can offer reporting and analysis services cost-effectively, this gives you a significant competitive advantage.
Competitive advantage 2: Increased productivity
As long as inflation rates are high worldwide, large parts of Europe are marked by economic uncertainty and many SMEs have to reduce their expenses, there is no way around a more efficient way of working. Blockchain technology supports process optimisations and efficiency improvements in fiduciary companies. According to IBM’s Blockchain and AI Dossier, blockchain in combination can increase the processing speed of transactions and boost productivity. For example, AI models can trigger transactions such as re-orders, product recalls or payments based on set parameters and resolve disputes by means of smart contracts (see also below) executed via the blockchain
Competitive advantage 3: more transparent accounting
During the financial crisis in 2008, there were calls for more transparency in accounting. The blockchain can be the catalyst for this, as it enables triple-entry bookkeeping. In triple-entry bookkeeping with the blockchain, one entry goes on the debit side, another on the credit side and a third in an unchangeable logbook. This creates a common accounting system for all parties participating in the blockchain. Since the blockchain is fully automated and decentralised, entries cannot be subsequently adjusted or removed. This ensures more transparency than double-entry bookkeeping. Using the example of the purchase of goods, this could look like this in practice: Company A makes an entry on the blockchain as a purchase and company B makes the entry as a sale. The transaction and the entry in the accounting of companies A and B as well as in the joint log book only take place if all parties agree. The fiduciary companies of companies A and B monitor the transactions and the accounting. In case of conflicts in the transaction history on the blockchain, they proactively intervene.
Competitive advantage 4: clearer contract terms thanks to smart contracts
In connection with the blockchain, so-called smart contracts are likely to play an important role in the trust sector. Smart contracts, as programmes encoded in the blockchain, offer the possibility of automatically executing contracts, controls and tasks as soon as certain conditions occur in advance. Parameters such as the terms of the framework contract, rules for the payment process and payment targets can be encoded in a smart contract. This means: certain processes only take place when pre-specified events occur and the parties involved confirm their existence. In fiduciary practice, smart contracts could be used as follows: Your fiduciary company is only obliged to place an order when your SME clients have submitted all the necessary documents and information. Especially in complex consulting projects such as a business valuation, documents that have not been submitted often turn up in the process, which leads to delays and has a negative impact on operating costs. When working together via blockchain, there are clearly defined rules of the game that the fiduciary company and SME have agreed on in advance.
Competitive advantage 5: Strengthening the employer brand
The use of innovative technologies such as blockchain has become an important factor in workplace design. With the ongoing skills shortage in the fiduciary industry, leaders need to be more proactive in providing an attractive work environment for young fiduciary talent. Investing in customised IT infrastructure, AI and other technologies that enable more efficient completion of repetitive tasks will benefit the digital natives being courted in the job market. The trustees of today and tomorrow find it easier to delegate work to technology than their older colleagues. The targeted combination of AI and blockchain supports process optimisation and allows trust companies to work both more effectively and more efficiently. If you can demonstrate in the application process that your trust company uses trend technologies profitably, this will generate not insignificant plus points with generation X and Y trustees who are in competition on the job market.
How important seemingly disruptive technologies are for the future of trusteeship
Blockchain can open up new opportunities and possibilities for fiduciary companies to future-proof their business model, operate more efficiently, meet changing client expectations and provide an attractive working environment for the next generation of fiduciaries. Trust business leaders should therefore do everything they can to take advantage of blockchain. To do so, they need to be open to new ways of working and technologies, and may need to rethink their existing business model. Would you like to find out what potential the blockchain holds for your trust company? Get in touch with our technology experts who specialise in the fiduciary sector.
How are busy trustees supposed to find time to deal with technology trends such as blockchain in depth? Innovative technologies can also help here. Outsourcing routine tasks such as document extraction, the reconciliation of sub-ledgers or the creation of reports on company key figures to intuitively operated fiduciary software greatly relieves the burden on fiduciary companies. This creates time and space for a holistic digital transformation, which, in addition to dealing with new technologies, also includes the rejuvenation of the business model, the development of customised advisory services for the fiduciary clients of tomorrow, the deepening of client relationships and the optimisation of processes.
