Fintech in Atlanta #4 - Interview with Jack Shaw, global thought leader on emerging technologies
For this interview, we talked with Jack Shaw, global thought leader on emerging technologies and Co-founder & Executive Director of the American Blockchain Council. He shared with us his views of blockchain technology in financial services.
1) What are the key areas in financial services that can be improved by using blockchain technology?
Before talking about the key areas that can be improved by blockchain technology I think it is useful to provide a brief understanding of what the technology is about. Blockchains have several key capabilities:
It enables the creation of a permanent, immutable record of identity, ownership of assets, business transactions, or contractual agreements.
The information stored in a blockchain can be shared among two or more relevant, authorized entities within any business ecosystem. This can include not only businesses, but also individuals, governmental agencies, and regulatory authorities. So this shared set of data can be accessed, viewed or updated, as allowed, by a group of entities in a given ecosystem. For those who are not authorized, blockchain technology is virtually unhackable.
Blockchain also allows the storage of smart contracts, which are the computerized equivalent of traditional legal contracts on paper. Smart contracts can have all the terms and conditions written in a traditional legal contract. And, if and only if those terms and conditions are satisfied, it can automatically execute the outcomes specified in those smart contracts.
These characteristics would enable improvements to a number of areas in the financial services industry:
Commercial banking: The tracking of assets such as physical asset registration on house, land and automobiles could make use of smart contracts to execute real time loan funding and other automated services.
Trade financing: HSBC has already announced the ability to issue a letter of credit based on blockchain, which would allow everyone who is authorized to access to see all the relevant transactions in real time. This letter of credit based on blockchain would greatly lubricate international trade and facilitate trade transaction to be settled more quickly and allow parties to receive financing at a lower cost.
Payments: The use of traditional methods such as SWIFT for international cross border remittances is often expensive and time-consuming. Blockchain based international remittances can reduce the settlement time from days to seconds. Also, with a much lower cost, micropayments or small payments become more practical with blockchain by using smart contract to automatically execute those payments without delays.
Capital markets: Clearing and settlement of different capital investments e.g. stocks and bonds typically takes up to three days. However, blockchain based initiatives can, again, reduce the settlement time to seconds, which is very valuable for financial companies providing investment services for their customers. Also, blockchain can secure immutable real-time records for packaged derivatives that can be accessed by all authorized parties.
Risk management: The biometric identity of specific individuals such as fingerprints and retinal scans can be incorporated into the permanent, immutable record of identity stored on a blockchain to eliminate the problems of identity theft. This is of great interest to companies as it could significantly lower the risk of money laundering.
Regulatory compliance: Blockchain enables the automation of regulatory reporting information, so regulators could have direct, real time updates on the latest financial information of lenders and borrowers to facilitate KYC and AML compliance.
2) With the emergence of blockchain and cryptocurrency, do you think the government and institutions will lobby against it, as they will start losing control over the economy?
So far, no government has lobbied against the use of blockchain technology. Instead, governmental organizations around the world are looking at how they could use blockchain to better manage governmental operations and to enhance regulatory oversight.
Some governmental agencies have expressed concerns that cryptocurrencies could undermine reliance on traditional fiat currencies. But others feel that, properly implemented, cryptocurrencies could help to facilitate international trade.
3) In your opinion, how will the use of blockchain technology develop over the next few years in the financial industry?
I believe there will be two significant trends over the next few years. First, the capabilities of blockchain technology will encourage not only major banks but also smaller financial institutions and emerging fintech firms to incorporate blockchain enabled solutions and capabilities into their standard offerings. Second, there will be increased coordination between the financial services industry and other non-financial industries such as manufacturers, distributors, and retailers, and others in collaborating on the use of blockchain technology.
4) What are some of the challenges for financial service companies and their non-financial customers to implement blockchain technology in their businesses?
The biggest challenge is for both parties to understand the business implications of blockchain technology. Senior level executives from the business and non-business sectors, such as governmental agencies or NGO’s, need to understand that blockchain is a game changer for them to develop well-thought new strategies. The biggest hurdle to adopting blockchain is educating senior executives about the challenges and opportunities blockchain could present to their organizations from a business management perspective.
About the interviewee
Jack Shaw is an emerging technologies strategist voted one of the top five Technology Futurists in the world in a poll by Speaking.com. His many years of first-hand experience assessing the impact of emerging technologies on business provide practical insights into how emerging technologies will impact organizations of all sizes. Jack’s experience includes roles informing critical business needs for such Fortune 500 organizations as Bosch, Mercedes Benz USA, GE, Coca-Cola, IBM, Oracle and SAP. Visit Jack’s website at https://jackshaw.io.
As Co-founder and Executive Director of the American Blockchain Council, Jack Shaw helps industry leaders recognize the latest developments in Blockchain and its strategic effect on global businesses. He is regarded as the world’s leading professional speaker on the strategic business implications of Blockchain, having delivered over 60 presentations in 12 countries on this subject. He also leads Breakthrough Business Technologies, a company founded to help technology users and solution providers uncover their competitive advantage and value to customers.