Co-chair of the Blockchain Ecosystem Network (BECON) Alex Bausch explains how the technology ties in to mobile and how fintech companies are using Blockchain to usher in the next generation of mobile financial services.

Since 2004, I have been involved in the mobile revolution. Enterprise Managed Mobility promised to make the SmartPhone more secure, and at the same time deliver more control over the employees’ device. Bring Your Own Device was the big promise. The mobile end-points turned out to be the next frontier. The problem was that billions of devices and an equal number of online (mobile) services were hard to secure in a scalable way. A better way was to secure the identity in combination with the online service.

Securing mobile identities at scale needed a different, automated trust framework. For instance, when using mobile banking apps to on-board millions of unbanked. It became clear that a new paradigm was badly needed – working with the masses requires low-cost mobile technology – but also mechanisms that scale. It looks like distributed ledger technology (DLT) delivers on the promise of automated trust. Blockchain offers that solution.

Blockchain is foundational technology, much like TCP/IP in the early 90’s. The big killer app on Internet, for a long time, was email, and only after many years the world-wide web gained traction – and new services were created. For Blockchain, there are many similarities – with Bitcoin being the first killer app.

The trick will be how distributed ledger technology can be introduced in other industries. There are huge opportunities – but the rate of adoption will be slow and determined by the stakeholders in each industry. Many industries will be disrupted – and may no longer be relevant. It is all about how to apply Blockchain. What application of the technology? For what purpose? Applied in what way? And with what safeguards? Financial services, music, logistics and healthcare are just a few examples of industries adopting Blockchain.

Blockchains ensure integrity and trust between strangers. Blockchains automate trust. They make it difficult to cheat. In other words, it’s the first native digital medium for value, just as the internet was the first native digital medium for information.”

Banks and insurance companies are modernizing online and mobile engagement to compete on a seamless customer experience. Industries are being shaped today by disruptive technology and consumer expectations for simple and convenient experiences.

One of the industries most dramatically impacted is financial services, as can be seen by the rise of online-only-banks. Smartphones are now the main resource for banking, offering customer anytime, anywhere access to their finances. Traditional corporations are looking for ways to differentiate as the younger generations don’t think their bank offers anything different than any other bank.

Blockchain accelerates the disruption of the financial services industry. When Satoshi Nakamoto first published the paper on bitcoin digital currency, it was in the heat of the financial crisis. Trust, interest, and remittance are the three main drivers for the financial services industry. Automation through blockchain will inevitably change the industry. It will enable financial services to billions of people who until recently did not have access.

According to the alliance for financial inclusion (AFI), an estimated 2.5 billion people do not have access to formal financial services, representing a huge untapped potential for economic and social development. There are more people using mobile phones than toothbrushes. Mobile is a must if we want to on-board the unbanked population. Socio-economic development: It touches the lives of all societies.

Especially, of course, those that are citizens and small businesses functioning without a secure infrastructure to run their business and livelihoods. Accepting deposits, providing life insurance cover, providing retail services like bill collection, the sale of forms, saving their money etc. An example is Humaniq,  a next generation mobile bank built on the open-source Ethereum platform.  In access of 86 banks have joined forces in the ‘R3’ consortium, to foster the development of Blockchain in banking.

Blockchain technology is difficult to understand, but the general idea behind it is quite simple. At the core, blockchain is a big global distributed database running on millions of devices open to the world, where anything of value like for instance money, titles, music, intellectual property can be stored securely. On the blockchain, trust is established, not by powerful men in the middle – like banks or governments, but through collaboration between nodes.

Blockchains ensure integrity and trust between strangers. Blockchains automate trust. They make it difficult to cheat. In other words, it’s the first native digital medium for value, just as the internet was the first native digital medium for information. And this has big implications for business and the corporation.

From a financial services perspective, the challenges that bankers are concerned about are the triumvirate of new competition, product innovation investments to prioritize and changing customer behaviour. How do they become an Amazon of financial services, providing a great user experience whilst having secure, reliable transactions.

The digital transformation of the financial service industry has a major impact on our society. Consumers are the driving force behind this change. Ultimately, they will determine who will be successful and who will not.

Alex Bausch

Co-chair, Blockchain Ecosystem Network

  

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