Blockchain and fintech: What impact will it have in the UK

As Blockchain startups and investments continue to grow in the UK, we take a look at the current impact of the technology on the market as a whole.

In 2008, Bitcoin evolved as the exciting new technology of Blockchain. Particularly within the past two years, Bitcoin has quickly proved itself as an innovative virtual currency with services such as Microsoft and PayPal now accepting the technology as payment.

However, although the most well-known, there is much more to Blockchain technology than Bitcoin. A self-maintaining database, Blockchain is a decentralised technology or distributed ledger on which transactions are anonymously recorded.

Blockchain has made significant progress over the years and enthusiasts, particularly in the UK, have been developing new ways to utilise and apply the technology.

The changing currency landscape

Initial coin offerings or ICO’s have recently gained popularity and could be the future of currency. There are many possibilities to this Blockchain technology and consumers and investors alike are excited at the prospects. The idea behind initial coin offerings is that the digital “coins” can be exchanged for Bitcoin or Ether (cryptocurrencies).

Pillar is one such London based company that uses ICO’s – the company has sold “tokens” in exchange for Ethereum. With over 200 million tokens sold, the funds from the Pillar token sale are being used to create the “universal smart wallet.” Users will have a cryptocurrency and token wallet with tokens being used for things like doctor visits. Data and prescriptions will be copied to the user’s wallet and managed completely by the user.

However, as more firms and even companies outside of the Blockchain field are using ICO’s, the Financial Conduct Authority warns users to proceed with caution as ICOs are mostly unregulated and potentially fraudulent. Also, as the technology is in the early stage of development and vulnerable to change, investors could risk losing their entire stake.

Beyond traditional transactions

Blockchain entrepreneurs are researching new ways to apply the technology – anywhere from renting an apartment to helping the government collect tax. This could change the future of transactions completely.
For example, the United Nation of High Commissioner of Refugees (UNHCR) recently worked with IrisGuard, a UK company which uses private Ethereum Blockchain technology, to help with streamlined payment services for refugees.

Instead of making payments with traditional currency or a smartphone, purchasers can pay for items like food with an eye scan. The user’s iris is converted into a unique digital code and registered into the bank’s iris database.

“The UNHCR has achieved financial inclusion for unbanked refugees and enabled them to efficiently receive international donor cash assistance directly on unattended bank ATM’s and food at checkout counters in supermarkets and nonfood items in camps,” says IrisGuard, “all while refugees are either unable or not allowed to open a bank account by law.” 

Inefficiency elimination

The number of users is going up for Blockchain and the technology has the potential to become an integral part of business operations for many firms. Exchanges need to be frictionless.

For the insurance distribution chain, Blockchain technology is increasing efficiency in a once operationally inefficient industry.

Consider the UK insurtech startup ChainThat. The company has developed a platform where risks can be insured without the need for physical documentation.

“For insurers today, there’s a complete lack of visibility of their liabilities and obligations. There’s also a lack of transparency across the business. This is where the regulators get particularly upset and are demanding better from insurers,” says Ryan Rugg from R3, an insurtech company partnering with ChainThat to develop distributed ledger technology solutions for the insurance industry.

Both companies desire to break down the silos between insurers and banks. Innovative Blockchain systems will help eliminate duplication, massive cost burdens, and inefficiency which in turn will increase trust with insurance companies.

The opportunities with Blockchain technology should only continue to grow and these developments will cause a greater impact on the economic and social landscape. As the use of Blockchain technology becomes even more widespread, it will be interesting to track these changes in the coming months to determine the impacts, whether positive or negative.