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Big corporates and startups are both embracing blockchain to slash costs and streamline businesses and in doing so driving the technology into the mainstream
29 JULY 2020
Any lingering misgivings about blockchain’s standing in the region were laid to rest last month when Saudi Arabia’s central bank chose to use the technology to inject liquidity into the banking sector.
In its ongoing support of the financial industry during the COVID-19 epidemic, the Saudi Arabian Monetary Authority (SAMA) gave blockchain a vote of confidence it deserves, while demonstrating a government body’s willingness to experiment with emerging technologies.
Saudi Arabia’s government has identified blockchain as a key enabler of its digital transformation strategy. Its Ministry of Communications and Information Technology (MCIT) is targeting 50% growth for the IT sector over the next five years, with blockchain identified as one of the seven key technologies driving growth.
Inspired by such promise, LEAP, a technology exhibition and conference event due to take place in February 2022, has made the digital ledger technology a key pillar in its content programme.
“Blockchain has the potential to revolutionise many sectors of the Saudi economy and make a vital contribution to the Kingdom’s 2030 vision,” .
“The use of blockchain today and the challenges facing its mainstream deployment will be key topics of conversation at LEAP,” he added.
It’s almost harder to pick an industry where blockchain cannot be employed than where it can.Take public service.
A crucial cog in Saudi Arabia’s Vision 2030 is transforming government through digitisation. Part one and two of the Kingdom’s National Strategy for Digital Transformation was based on modernising government processes through e-governance. Blockchain has the potential to supercharge e-governance.
For example, with a blockchain-based government model, citizens, businesses, and the government can share resources over a highly secure distributed ledger.
Governments are planning to migrate the entire government functions onto blockchain including government ID, offerings, payments, tendering, registration and licensing, commented Irina Copper, Managing Partner at Innovo Capital, which provides mentorship and fundraising for blockchain startups.
“The objectives are straightforward: to ensure transparency of government, to enhance efficiency in governmental service delivery, the digitisation of identity and assets, and the introduction of frictionless and low-cost payments and settlements mechanism,” Cooper added.
As Saudi Arabia moves at pace to diversify its economy, the adoption of blockchain has the potential to reorganise economic activities and in doing so reduce costs. Given the rise of cryptocurrencies in the last two years, the financial sector is expected to be a major adopter of blockchain. The technology’s distributed consensus-based architecture eliminates single points of failure and reduces the need for intermediaries.
For instance, blockchain-based smart contracts can revolutionise the traditional lending system, said Ramy AlDamati, Founder, TrustyCrypto, a firm that offers online security for the cryptocurrency ecosystem.
Currently, lenders charge exorbitant interest to borrowers with little or no collateral. “Blockchain can overcome this disconnect by allowing a stranger to loan you money, while taking your smart property as collateral. No need to show the lender credit or work history. No need to manually process numerous documents. The property’s encoded on the blockchain for all to see,” explained AlDamati.
Another bureaucratic industry that could benefit from a good dose of blockchain is insurance, a traditionally risk-averse industry in dire need of change.
Reconciling payments between insurance companies of two parties involved in a motor accident is a laborious process that can take up to six months and involve the exchange of multiple documents, including discharge notes, invoices for repairs, quotations, police reports,
According to Walid Daniel, Addenda Co-founder and CEO, as much as AED1.8bn per year is stuck in this recovery process at any given time in the UAE alone due to the complexity involved.
Addenda is using blockchain to streamline this reconciliation process. “We have digitised about US$30 million worth of claims since launching in November last year. This provides insurance companies with a single point of truth when reconciling with each other,” said Daniel.
Rampant fraud also plagues the industry. “In the UAE, 10-to-15% of claims are fraudulent, and this has almost become an accepted cost of doing business,” Daniel commented.
Addenda has accumulated thousands of accident reports, hundreds of thousands of photos of car crashes and car repair costs on its blockchain. “Down the line, we intend to use business logic algorithms to flag suspicious transactions by using several indicators to identify patterns of fraud,” Daniel said.
And this is just the beginning. “Blockchain’s adoption pace is constant and remarkable, [and] it can be improved by way of proactive participation from governments and financial institutions,” said Cooper.
Blockchain has the potential to disrupt entire industries. Based on transparent and immutable ledgers, the technology makes it easy for different parties in a network to collaborate, manage data and reach agreements without the myriad arbitrators, middlemen and monopolies
that have collaborated to add undue complexity, costs and time to most of life’s processes. We will all be the better for it.