Future of Clearing and Settlement Lies in Blockchain

This post originally appeared on the IoT Tech Expo World Series blog and is republished here with permission.

Today’s ecosystem of interconnected networks and transactions is big, getting bigger, and well on its way to redefining the way we do business. This is especially true in the area of clearing and settlement, since a multitude of transactions have to be securely monetized by numerous parties.

In this area, blockchain has become the logical evolution for best meeting the requirements of this new ecosystem. Blockchain will, among other changes, eventually enable many businesses to eliminate a large portion of the current manual process for revenue assurance and create immutable audit trails, enabling faster and easier monetization of transactions through “smart contracts” and the linking of disparate ecosystems in a simplified way.

In particular, a crucial factor driving the adoption of blockchain is that the number of transactions is increasing tremendously in an all-connected world driven by, one, the IoT, and, two, 5G, the new mobile standard that will enable the robust and reliable foundation for powering the IoT. In parallel, the requirement to be able to securely validate and monetize these transactions has become more vital than ever. Blockchain technology offers capabilities that are ideally suited for solutions that address these business challenges. 

In my role in clearing and settlement for Syniverse, I’m frequently asked about blockchain, and here I’ve put together some of the most common questions on how blockchain is being used by mobile companies now and what opportunities are emerging in 2020. I hope you find them insightful.

How are mobile operators integrating blockchain now?
We’re witnessing a market shift toward what I call “universal commerce,” where operators are going to start to do more business with new partners as 5G technology is adopted locally and globally. There will be companies in other industries that will need 5G to implement next-generation use cases. As a result, mobile operators will have a tremendous opportunity to capitalize on this market need and expand their revenue opportunities.

As new players start doing business with operators, how will blockchain become more important?
With the unprecedented growth of IoT, billions of new devices are entering the market, for which operators need a way to clear and settle payment between partners. It will be key to redefine their billing and charging processes to handle large volumes of “smart contracts” and transactions between parties. Those parties must be able to collaborate in an ecosystem with accuracy, real-time speed, security, and, especially, trust. This trust is provided by blockchain’s underlying cryptography and distributed consensus.

How will blockchain help mobile operators with billing and charging?
Let’s take mobile roaming for example. Currently, there are lots of questions involved with billing between business partners. “My results look different than your input” is common. That leads to time spent on dispute resolution and is cause for delays in settlement. But, with blockchain, there’s what’s called a distributed ledger. With distributed ledgers, everybody has the same information in a private blockchain network. This ledger houses agreement terms established for the relationship using smart contracts as well as a full audit trail on usage data that follows its path to settlement. Importantly, a major benefit of a blockchain ledger is it can’t be altered. This reduces the likelihood of discrepancies and disputed invoices, because they are based on a highly accurate, reliable set of information that can be seen much earlier in the monetization process.

What are some challenges that blockchain as technology may pose?
With recent regulatory acts like General Data Protection Regulation (GDPR) requiring companies to have the ability to exclude and secure personal data in their transactions, using blockchain as it was intended will involve some big changes in business processes. In the case of GDPR, for example, managing these new responsibilities through an automated system that can’t be directly controlled may pose a number of challenges for companies conducting transactions with EU citizens. However, this can be solved by, as an example, processing select information off-chain and posting aggregated results on the blockchain.