Dr John McCallig’s research into the accounting system of the future built on blockchain technology and cryptography has earned him a sought-after award for invention, writes Arlene Harris.
As Assistant Professor in Accountancy at the UCD Lochlann Quinn School of Business and the UCD Michael Smurfit Graduate Business School, Dr John McCallig has long held a fascination for business, financial systems and the ways in which technology can improve both.
Even as a teenager growing up in Claremorris, Co. Mayo, McCallig, now a Fellow Chartered Accountant, recalls an early interest in “the world of numbers” and emerging computer technology.
After learning how to programme early home computers, McCallig went on to complete a degree in commerce at NUI Galway followed by a DPA (now Master of Accounting) at UCD.
“My research career began with PhD studies at Lancaster University in the UK and my thesis and subsequent research focused on the relationship between stock market returns and accounting numbers,” said McCallig.
“More recently, I have become interested in how the use of cryptography in business systems could produce better data for decisions by investors, regulators, and the public.”
This interest is proving fruitful for McCallig, who was recently named recipient of the 2022 Invention of the Year Award by NovaUCD, the Centre for New Ventures and Entrepreneurs at University College Dublin.
Announced in March at the 2022 NovaUCD Innovation Awards, the prize was given to McCallig in recognition of his research into the use of blockchain technology and advanced cryptography to design accounting systems that could enable transparent access to verifiable data.
Through this research, McCallig has established that building such systems is theoretically possible and could potentially lead to a complete redesign of financial reporting processes in the future.
His award-winning invention uses privacy-preserving analytics to collect and share commercially sensitive information about VAT obligations and payments.
This innovation can confirm that the proper VAT payments have been made—in real-time and without breaching the privacy of any individuals or firms involved.
The potential impact of this invention would be to provide the basis for a system that could interact “natively” with the digital economy to help build a modern and fair tax system, according to McCallig.
Now, he is keen to find out more about how his invention might work in practice.
“I have been working with NovaUCD on the commercialisation of my research on the use of cryptography in the VAT reporting and payment system and I am delighted and deeply honoured to have received the 2022 NovaUCD Invention of the Year Award,” he said.
“I appreciate the recognition this award gives to innovative ways of ensuring privacy and data integrity in critical social systems, like the VAT payment system.”
Cryptography is the practice and study of secure communication techniques that allow the contents of a message to be viewed only by the sender and its intended recipient.
“Many people think of cryptography as all or nothing—you encrypt a file, in which case nobody else can get any information about it, or you leave it unencrypted,” said McCallig.
“In fact, modern cryptography provides a rich toolbox of techniques, which can be used to provide partial access to information.
“One example is homomorphic cryptography, whereby mathematical operations can be performed on encrypted data.”
McCallig pointed to pay gap research published last year by Boston Women’s Workforce Council in the US, which collected payroll data in a secure manner without revealing information sourced from any individual company involved in the study.
“One idea I have been working on myself is how a company’s receivables can be confirmed in a more efficient way,” McCallig said.
“This relies on both the company and its receivables encrypting data about the obligations, so that data from the company and the debtors can be compared without revealing the data.”
Although he does not foresee a future in which the fundamentals of accounting will change, McCallig is convinced that digital technology will play an ever greater role.
“The digitalisation of accounting data in companies is nearly complete. Almost all significant enterprises have sophisticated Enterprise Resource Planning (ERP) systems,” he says.
“The interfaces between businesses are still mainly manual, however, with information being shared using email and PDFs.
“Here, there is an opportunity to design systems that not only allow the secure exchange of information, but also provide access to high-quality information for auditors and stakeholders.”
Advanced cryptographic systems are, McCallig believes, ideal for this kind of application.
“I am fascinated by the role of information in business decision-making and resource allocation in the economy,” he said.
“Accountants play a key role in providing this information and my interest is in exploring whether advanced information systems could improve the quality of this information.”
As he continues his work at UCD—where he teaches financial accounting, financial statement analysis and accounting technology—McCallig is intent on ensuring that the next generation of accountants are fully up-to-speed with the various technologies playing a role in the future of finance.
“It has been a privilege to teach and research at UCD and I am hoping to introduce more material on accounting technology, data analytics, blockchains and cryptography into the university’s accounting curriculum in the future.”