Blockchain has become a buzzword. Technology companies that have been developing blockchain applications for accountants have used the word to generate excitement (and investment), but who can blame them? That’s what tech companies have done, for time immemorial, to get their product funded and into the hands of the intended end user.
In its annual Global Blockchain Survey, Deloitte called this undefined exploration of the new technology “blockchain tourism.” The hype seems to have died down, but that doesn’t mean the tech in development has gone away. Now, the profession is seeing the promises of the past few years finally come to fruition. But fintech developers have become cautious about their use, or overuse, of the word blockchain, careful to make sure they have the capability to deliver before they start hyping up their product.
Deloitte’s Global Blockchain Survey from 2019 found that “Today, fintech remains a blockchain leader, but more organizations in more sectors […] are expanding and diversifying their blockchain initiatives. Still, despite these advances, progress remains measured in the wake of blockchain’s first cyclical rise and fall, and the resulting attitude shifts following the initial blockchain buzz.”
Part of the caution stems from the Bitcoin bubble of 2017 and 2018, points out Sean Stein Smith, Ph.D., a blockchain expert who teaches in the business and economics department at Lehman College. In 2017, Bitcoin, the first and most well-known cryptocurrency, ended the year valued at almost $20,000 per token. After a major sell-off, its value fell 80 percent, and hasn’t fully recovered since.
“It would be hard for investors [in blockchain] not to be more skeptical or more cautious now,” Stein Smith said. “After 2017 and 2018, the overall marketplace is a bit more cautious in their assessment of any blockchain or crypto application.”
Stein Smith also sits on the advisory board of Gilded, a company that just released a first-of-its kind accounting and finance platform built on a blockchain. The platform handles invoicing, payments, and accounting and tax reporting for cryptocurrency. It offers non-custodial verification of crypto payments and support for Coinbase, a crypto exchange platform. It’s one of the first examples of a blockchain application that can be used, right now, by accountants. And that’s a good sign that the profession is moving in the direction it was promised.
PayPie is another example of a company that is taking that “measured” approach to blockchain development. PayPie arrived on the scene in 2017 promising what accountants were curious and cautiously excited for: accounting on the blockchain, complete with proprietary cryptocurrency tokens. Today, the company has a fully fledged cash flow management and analytics platform, and is carefully working on the blockchain piece so that when it is released, it will deliver as promised.
The value in a platform like PayPie, which will eventually be blockchain-based, is in single ledger accounting. Nick Chandi, founder and CEO of Paypie, explained that with it, accountants and clients using different accounting platforms linked or partnered with PayPie will be able to exchange information — i.e., ledger entries — back and forth seamlessly without needing to re-enter the information in different ledgers.
“Single ledger is where we deliver value,” Chandi said. “With PDF extraction, we don’t need to do optical character recognition, for example. What’s going to happen is using blockchain and accounting financial data, information will start flowing from one system to another.
A third party, with permission, can then run a node and look at the data if they need to.”
Till now, most blockchain applications for the accounting profession have been leveraged by the largest firms — namely, the Big 4 — and mainly on the audit side. Indeed this is how most technology adoption goes. The Big 4 innovates, demonstrates value, and incrementally, firms in different size tiers start to leverage the tech for their needs as it makes sense both in cost and application.
It makes sense that blockchain is being leveraged first for accountants in audit. Blockchains are, by design, inherently resistant to modification, and they can record information between two parties in an efficient and permanent manner. Sandro Psaila, audit and assurance manager at Deloitte, gives a use case example: “Instead of asking clients for bank statements or sending confirmation requests to third parties, auditors can easily verify the transactions on publically available blockchain ledgers such as www.blockchain.info or www.blockexplorer.com. The automation of this verification process will drive cost efficiencies in the audit environment.”
Audit business is vastly the domain of large firms. Between them, KPMG, PwC, Deloitte and EY handle 50 percent of all audits for public and private companies. Then, large firms like BDO, RSM, Grant Thornton and Moss Adams handle the rest. In other words, audit is not the domain of small and solo practitioner firms. For them, blockchain will have to demonstrate applicability in accounting, bookkeeping, tax, and client accounting services, which is where companies like Gilded and PayPie come in.
“We are thrilled to see that scenario planning tool built into PayPie is among the most popular features and almost every new advisor ends up playing with it,” Chandi said. “In 2020, accountants will find improved functionality with a much cleaner interface that allows them to find bottlenecks in their clients’ businesses by understanding all the crucial data; and so that they can develop a plan of action and execute on it.”
Editor’s disclosure note: Ranica Arrowsmith sits on the advisory board for PayPie.