Blockchain: An Emerging Technology Perfect for Emerging Economies
April/May 2019The price movement of Bitcoin and Ethereum last year propelled blockchain, the underlying technology of all crypto-assets, into mainstream consciousness. Yet as the overvaluation of cryptocurrencies undergoes a major (and much needed) correction, it remains important to understand the implications of distributed ledger/blockchain technology.
We see tremendous potential for blockchain in emerging economies. Financial services and insurance in the United States are sophisticated and offer adequate comfort, convenience and safety measures to service and protect retail consumers.1 This trust in centralized parties, however, is not a universal reality. Thus, in emerging economies, the institutional trust required for the provisioning of financial services and the breadth of coverage of newly growing economies can benefit from decentralized technologies.
Blockchain is a “trustless” ledger technology that minimizes central authority control. It enables peer-to-peer transactions with minimized need for costly “trusted” third-party assurance, bookkeeping or facility. Blockchains also provide an immutable history of transactions, which can be leveraged as a bona fide identity for individuals and families without access to traditional, state-sanctioned identities. In this way, blockchain protects against the failure of centralized institutions (relevant in many emerging markets experiencing hyperinflation or broken financial sectors) and enables services for demographics that are often left out of the traditional financial sector due to identity and credit barriers (some 1.7 billion adults across the world).2,3,4
At Dunya Labs, we are excited to be working on bringing decentralized technologies to the emerging Indian market. These India-specific demographic factors indicate it is ripe for blockchain adoption:
- A young population, with more than 50 percent under the age of 255
- One of the world’s largest smartphone populations, growing 30 percent year-over-year6
- A price-sensitive market, which would respond to reduced costs7
As this previously untapped, unbanked and young market expands, blockchain technology can help pave the way for industries to leverage benefits inherent to distributed ledgers such as enhanced data security, decreased intermediary costs, seamless cross-border transactions, lower identity/credit barriers and diminished need for trust in centralized parties. In the insurance industry, companies have begun to pursue initiatives targeting enhanced fraud detection and risk prevention, new products intertwined with medical records stored with universal identities, and “smart contract” guarantees/escrows.8
If we draw comparison to early days of the internet, no one could have possibly imagined the primacy of online delivery over brick-and-mortar stores. This is the potential of blockchain—the potential to disrupt and create entirely new and innovative business models.
References:
- 1. Huddleston, Cameron. Survey Reveals Americans Have More Trust in Banks Since Recession. Go Banking Rates, July 22, 2017. ↩
- 2. Rehman, Shoaib Ur. Venezuela’s Annual Inflation Surges to 1.7 Million Percent. Business Recorder, January 10, 2019. ↩
- 3. The Economist. Airtime is Money. The Economist, January 19, 2013. ↩
- 4. Demirgüç-Kunt, Asli, et al. The Global Findex Database 2017. The World Bank, 2018. ↩
- 5. Jack, Ian. India Has 600 Million Young People—And They’re Set to Change Our World. The Guardian, January 13, 2018. ↩
- 6. eMarketer Editors. More Than a Quarter of India’s Population Will Be Smartphone Users This Year. eMarketer, May 3, 2018. ↩
- 7. Thomas, Prince Mathews. ‘India is a Price-Sensitive Market’: Andreas Barner, Boehringer Ingelheim. Forbes India, May 31, 2014. ↩
- 8. Hertz, Kaenan, Dave Nuernberg, and Angus Champion de Crespigny. Blockchain in Insurance: Applications and Pursuing a Path to Adoption. Carrier Management, November 1, 2016. ↩
Copyright © 2019 by the Society of Actuaries, Schaumburg, Illinois.