Blockchain Not Predicted As Top B2B Payment Method By 2028
Dun & Bradstreet recently conducted a survey of finance professionals to help understand where they think the future of business-to-business payment methods is headed. Given the amount of digital ink spilled on the subject of blockchain technology, we were surprised to learn that only 26% of those polled during the AFP 2018 Treasury & Finance Conference in Chicago believed that blockchain and smart contracts will dominate B2B payments by 2028.
Perhaps more unsettling is the fact that, of the 26% who chose blockchain as the preeminent payment technology of the future, only 20% reported that their companies already use it to send and receive payments. That’s well below the 49% adoption rate claimed by professionals who selected other payment technologies. We have several theories as to why blockchain is facing such significant headwinds when it comes to B2B payments.
First, blockchain technology has a high barrier to entry. Blockchain networks are complex and it takes skilled developers to design programs that handle payments and contracts. In fact, LinkedIn’s 2018 Emerging Jobs Report saw the position of blockchain developer barreling out of the gate with a 33X increase in demand over 2017. Simply put, the market can’t meet that kind of interest, and we can assume that only companies able to pay a premium for blockchain talent will be able to take advantage of this technology in the near future. That bottleneck is great news for developers but represents a serious obstacle for widespread adoption of blockchain in the B2B payment space.
Next, there are limitations to blockchain technology that is especially problematic for the purposes of accepting payments or validating contracts. One is the cost of maintaining a distributed digital ledger, which requires incredible computing power and, as a result, a lot of electricity. Ironically, one of the blockchain’s strengths–the security that comes with verifying transactions via the consensus of multiple parties–also exposes a weakness. Confirming transactions often takes more time than businesses are accustomed to, making blockchain an effective, but sluggish, option for B2B payments and smart contracts.
Regulatory uncertainty is another challenge that may be deterring businesses from exploring blockchain for payments. We’re still in the Wild West days of the technology and governments have yet to build out a comprehensive framework for oversight. There are risks associated with pushing into a new frontier, and many businesses are probably happy to sit on the sidelines and learn from the mistakes of pioneering companies. It should be noted that these wallflowers are less likely to reap the rewards waiting for their more daring competitors. In the best-case scenario, governments and businesses will work together to establish regulations that guard against illegal activity without halting innovation.
It would be unfair to blame governments for all of the uncertainty around blockchain. Anyone who’s been paying attention has seen volatility in cryptocurrencies and the steady drumbeat of news about online systems being hacked. Business-to-business payment processing is mission critical, and no company wants to expose themselves to more risk with limited upside. Solving this problem may be a function of time and advancements that come with more developers gaining competency in the blockchain.
Finally, companies looking to adopt blockchain technology will find an embarrassment of riches when it comes to choosing how to execute on their plans. There’s no agreed-upon coding language and this represents a substantial roadblock for businesses trying to send and receive payments on a global scale. Sticking with what works might not be exciting, but it may be preferable for companies that simply don’t have the luxury of absorbing losses that can come from making a bad bet.
