In previous blogs, I’ve looked at why agencies need to collaborate in expanding ecosystems of partners to make sure members get the holistic support they obviously want and need. This time around, I want to show how new technologies, specifically blockchain, can play a vital role in enabling the collaboration and data-sharing that are now so vital.
This collaboration is in step with broader trends. 36 percent of businesses report working with double or more partners than they did two years ago. And, like pension agencies, a key challenge for many is the legacy systems at their core. Bottom line? These simply weren’t built to support new tech-driven partnerships at scale.
So how should public pension organizations move forward? To develop services and experiences that are truly relevant to their members, they need to become boundaryless, secure and adaptable. That means there is an urgent need to find ways to bridge from core to new systems. What’s more, the rate and extent of change they face means agencies can’t do everything alone. Connecting with others is the only way forward.
This is where a microservices architecture and blockchain have so much to offer – providing a flexible foundation for rapid, seamless integration with members and new ecosystem partners. It’s the right solution at the right time for public pension plans to contemplate. Under pressure to reimagine the pension benefit delivery operating model, this creates an outstanding opportunity to create, scale and manage new ecosystem relationships.
Executives in every industry recognize the value these technologies will bring to their organizations: 60 percent of them say blockchain and smart contracts will play a critical role over the next three years. And it’s easy enough to cite a whole range of use cases in public pension administration where the impact could be transformative.
For employer reporting and reconciliation, blockchain will provide a single version of the truth, eliminating data redundancy and improving data integrity. For reciprocal pension plans, blockchain can support a peer-to-peer network for sharing real-time information-sharing and digital transactions.
It will boost ecosystem security and build trust through identity and access management. And with inter-government records stored, managed and shared on blockchain, partners will have access to real-time data records, with an enhanced experience for members, employer organizations and staff through one-stop changes and a single source of the truth (including address changes, death registrations, employment status, taxation and so on). The opportunity for operational uplift from the capacity being created from operational efficiencies – in terms of a shift from transactional to higher value work – is pervasive.
The list goes on. And it’s a persuasive one, particularly so because the technologies pension plans need are now readily available. So, what’s slowing down the adoption in government agencies?
There are a number of factors. Most countries still face legal barriers to using blockchain-notarized documents in a court of law. The US is no exception. Clarity’s needed over whether digital signatures can be legally binding. Changes in records often require in-person visits to official registries. And many states need to pass bills to conduct studies into the use of blockchain by government.
There are practical hurdles too. Some records may exist only on paper. Individual agencies typically maintain their own silos of data. Many of them have limited capacity for innovation and experimentation. And leadership will usually want to see a proven business case before moving forward.
Blockchain-based solutions are particularly rewarding when there’s a complex business challenge involving workflows across multiple stakeholders. It’s why governance issues can often arise and, up to now, there’s been no real consensus on what process governance models will be needed.
Applying blockchain solutions will often mean shifting to a new operating model (from centralized to distributed processing, and from authorization to consensus-driven). This means culture-based issues will have to be addressed. And, of course, public trust issues remain. In most people’s minds, blockchain is still associated with cryptocurrencies.
None of these challenges are insuperable. And the benefits for public pension plans of moving toward blockchain-based collaboration are not in doubt – from eliminating duplication of source data and dramatically improving the accuracy of the reconciliation process to preventing fraud and overpayments.
So, what should pension administrators do to get things moving with a successful proof of concept?
- start small, with a very specific business problem and a finite set of data elements
- be prepared to make an appropriate level of investment to ensure sufficient testing
- select a partner that will be collaborative and willing to consider changing policies/procedures and challenging existing legislation where necessary
- commit the right resources and communities to create the best network of technology, skills and experience, and
- ensure effective communication and engagement so all stakeholders understand the opportunities blockchain creates.
I’d love to hear your views about blockchain. Please share your thoughts below.