As is usually the case with disruptive new technology, blockchain comes with a lot of hype. While its best-known application, bitcoin, divides opinion and makes banks and governments nervous, the technology may have great potential to advance social good.
Serving the underserved
Fintech companies across the globe are using blockchain to improve financial systems and redefine how businesses and individuals make payments. Coins.ph operates out of the Philippines, where transferring money electronically is very popular but can be expensive. The company built a mobile app that runs on blockchain technology and allows cheaper, quicker and more direct fund transfers for those with limited access to formal banking. Users can open an account simply by inputting a phone number and digitally verifying their identity. Transactions are settled instantaneously and at a fraction of the fees charged by traditional banks. This translates into increased disposable income, better resilience to economic shocks, and wider participation of the most vulnerable populations in the financial system.
Like Coins.ph in the Philippines, Kenya’s BitPesa, Mexico’s Bitso, India’s Unocoin and others are using blockchain to expedite cross-border payments, establish new types of digital wallets and allow peer-to-peer payments with digital currencies for previously unconnected people and markets.
As both a database and infrastructure that enables the secure transfer and recording of assets independently of central banks, blockchain is believed to be the most decentralized and secure digital protocol to date, and its market is expected to grow to at least US$2.3 billion by 2021. It’s catching people’s attention across all sectors, and “inclusive business” – for-profit ventures that engage low-income populations as customers or owners – is no exception.
As well as making financial products more inclusive, blockchain is giving people digital identities and revolutionizing personal data management. This is most profound for millions of individuals with no formal economic identity, as well as refugees.
BanQu, a start-up from the United States, is using blockchain technology to create secure and verified IDs for the world’s most vulnerable populations. Through the BanQu app that runs on any mobile phone, an individual can build his or her online profile through facial and voice recognition and start tracking everything from educational qualifications to transaction history. Over time, users build up a financial ID, eventually being able to open bank accounts, own property and access healthcare and other basic services.
Another sector where blockchain has particularly far-reaching potential is global supply chains. With its unique capacity to transfer, record and monitor assets in a virtual space at a low cost, blockchain is well suited to respond to the challenges of supply chains, such as:
- Evening the playing field. It seamlessly integrates all supply chain players into one system and serves as a single electronic house for an infinite amount of documentation. As traditional costs and barriers to enter are eliminated, even the smallest producers and suppliers have equal footing.
- Responsible sourcing. It provides a platform for transparent procurement in which every market participant can verify sourcing and compliance in line with existing regulations and good environmental, social and governance standards.
Provenance, a London-based startup, has successfully tested blockchain technology on the Indonesian tuna supply chain (one of the most controversial in the world). Fishermen sent an SMS after every catch giving it a digital identity at the point of origin. A digital ID code enabled tracking at every step of the journey, with new information added along the way, until the fish reached Japanese restaurants. Scaled further, the revolutionary technology can verify ethical claims and help enforce labour and environmental standards in the private sector.
Smart and efficient. Blockchain’s use of smart contracts eliminates fraud, avoids intermediaries, and saves costs and time. It enables users to carry out all contract conditions and functions automatically, as programmed. For example, it could guarantee the delivery of a certain good or service only once the payment is received. If there is a delay, the smart contract will prompt a response. For the most vulnerable supply chain actors, this is revolutionary, because such contracts prevent tampering and help ensure fair treatment.
Blockchain technology can contribute to the achievement of the 17 Global Goals for sustainable development – to end poverty, protect the planet and empower women and men by 2030 – in line with the aims of inclusive businesses. Furthermore, its integration in global supply chains is directly linked to responsible consumption and production, innovation and the elimination of hunger. The application of blockchain technology is expected to inch into areas not previously thought possible – from the digitization of governments’ key functions to transforming healthcare by reducing barriers to accessing services for the underserved.
While there is undoubtedly immense potential for blockchain technology to serve humanity, it needs to be scaled to reach full impact. Despite breakthroughs, it remains nascent and experimental. Governments and banks have been very cautious to embrace it, and for good reason. Technological and regulatory challenges must be resolved before blockchain delivers on its potential for affirmative social impact. Technological talent is still expensive, and the platform is not yet transferable to a simple mobile phone. As always with innovation, eyes are on the private sector to advance this technology for large-scale impact. This may not happen today, but the journey is underway, and it looks to be a rewarding one.
About Business Call to Action (BCtA): Launched at the United Nations in 2008, BCtA aims to accelerate progress towards the Sustainable Development Goals (SDGs) by challenging companies to develop inclusive business models that offer the potential for both commercial success and development impact. Find out more at businesscalltoaction.org.