Can Blockchain prevent a massive savings gap, expected to hit USD 400 million globally by 2050? We look at possible use-cases and disrupters who’re already changing the game
Among the many technology trends making the rounds in 2017-2018, few have made headlines as often as blockchain. Because of its essentially fluid nature, blockchain technology can have a plethora of applications, across industries. Think of the internet, a technology that first emerged as a way to share and access data. Today, it powers business applications, supports social media platforms, enables UX-less backend operations, and so much more.
Similarly, blockchain is extremely versatile, capable of bringing heightened efficiency in any number of segments. In HR, for instance, blockchainOpens a new window is revolutionizing payroll procedures, background verification, and even gig-contract management.
Here’s how it works.
A transaction is defined, including buyer and seller details, and relayed to the network. The multiple network components check these details and place them, virtually, alongside other recently authenticated transactions. At specific intervals, transaction sets are relayed to the network by the components as ‘blocks’. These blocks are then verified against each other via trial and error. The verified blocks are then ‘chained’, containing error-free data and information.
What are the possible implications, for HR managers handling large volumes of employee transactions?
Well, the entire procedure is highly secure and largely immune to fraud. As an employer, organizations are responsible for their workforce’s fiscal well-being. Blockchains could help ensure payments and investments are protected against rising instances of cybersecurity attacks and digital vulnerabilities.
Second, millennials are known to invest diversely and frequently, creating a varied pension pot. Blockchain would integrate this pipeline and allow the individual to retain control, no matter the investment platform of choice.
Finally, one of the biggest virtues of blockchain technology is that it guarantees immutability. Once the required modifications are made, transaction details would be stored in perpetuity – even if the individual changes jobs, locations, or career pathways.
In an environment where young employees and top talent are expected to be ‘job hoppers’, blockchain would be a connected thread, accruing pay records and pension investments across professional lifecycles.
Last year, APG and PGGM, the managers of the two largest Dutch pension funds, announced that they are testing a blockchain-based system to help make administering pensions simpler and cheaper. According to reports, the technology in use is a refined and adapted version of the system underlying the popular cryptocurrency, Bitcoin.
While payments in Bitcoin is already going mainstream and several payroll solutions have incorporated this feature, pensions still present uncharted waters.
The companies expect pension management to become significantly easier to govern, with records available at the touch of a button and data continually updated according to preset rules.
So, what exactly are the use-cases in pension and retirement planning, where blockchain could play a role?
Plan document and records management
A highly complex process, especially at senior levels, or if you hold multiple positions during your tenure in the same company, or when changing employment, document management is among the key use chases for blockchain. This would allow details like version history, time-stamps, and signatures to be fully visible and trackable.
Participant proxy voting
In larger organizations, funds are often reinvested by pension providers in mutual funds, after requisite approvals and authentication. These audits can be a cumbersome process, generally performed by software that offers little visibility and control. Blockchain makes it cheaper to conduct proxy voting and simplifies the audit process.
Loan from retirement funds
This is a highly regulated feature, as authorities prefer pensions are not withdrawn unless it is an absolute emergency. Blockchain ensures the usage of funds is tracked at every stage, lending credibility and verifying cause of loans. Further, employees would enjoy heightened flexibility over their pension pots – using the funds according to their own discretion.
As an added bonus, employers might even use Pension Coins as reward mechanisms – incentives for employees that would add to their accrued funds and boost long-term fiscal stability.
A disruptive company that’s doing just this, is Akropolis, a startup that’s looking to address the looming challenges of the pension industry (increased life expectancy, higher risk-appetite, and poor financial planning, among others) using blockchain-based tokens.
There you have it.
Blockchain is clearly a game-changer in HR, from job searchOpens a new window and recruitmentOpens a new window to benefits administration and even funding. If adopted and adapted intelligently, it could completely transform how we approach pensions and retirement planning