The UK government is getting serious about blockchain, and the future of fintech could be the key to delivering better public services.
UK services are drowning in bureaucracy. We live in an age where products can be purchased at the swipe a finger and delivered within the hour, but try to secure a lease and you’ll be required to visit a solicitor in person, grab hold of a bible and physically scribble on the dotted line. Not even our parliament can form a government without first jotting the fundamentals down on goatskin parchment. As political scientist and digital democracy campaigner Pia Mancini says:
“We are 21st-century citizens doing our very best to interact with 19th century-designed institutions that are based on an information technology of the 15th century.”
All of our clients at Nile would prefer their services to be faster, simpler and more seamless. Asking a user to fill in a form or sign a document may seem trivial on its own, but can often add unnecessary complexity to interactions. Paperwork has to be printed and provided to customers, then checked, digitised and stored by organisations too. It’s easy for this to get in the way of designing brilliant services, not to mention overcomplicating the systems behind the scenes.
Here in Scotland, the University of Edinburgh’s School of Informatics has just established the Blockchain Technology Lab. Bringing together legal experts, computers scientists and designers, the research hub aims to use the technology to imagine and build innovative new services. The director of the lab, Professor Aggelos Kiayias, believes that smart contracts can play a role in helping us shed our paper addiction and improve user experience widely. He says:
“There’s nothing inherently wrong with paper contracts. They’ve worked well for hundreds of years, but now trade is global and it’s necessary to use technology to make contracts work for the internet age. The infrastructure for this technology is still being built, but the underlying principles have been proven, so we’re now in the exciting stage of discovering the best ways to implement it.”
Like their conventional counterparts, smart contracts define an agreement between parties that is binding. Payments from one party to another can be scheduled to process on a particular date, or triggered by a set of predetermined conditions. But while paper contracts are bound by law and subject to interpretation by legal professionals, smart contracts are secured by the blockchain.
These digital contracts enable a seamless payments network to be built directly into the Internet of Things infrastructure that’s emerging. Smart meters, for example, will automatically withdraw funds on a per-use basis rather than calculating monthly bills. Leasing a car on holiday could soon be as simple as scanning a QR code with your mobile phone.
Paper doesn’t have a lot of friends left these days, but it’s fair to say that the finance sector is waging an all-out war on physical documentation. From chatbots to biometrics, fintech has exploded and nearly every innovation it brings is designed to replace legacy systems — and the paperwork that comes with them — with integrated applications that automate and improve existing services.
Here in the UK, the Bank of England has established a fintech accelerator programme to learn from fintech startups. Similarly, the Financial Conduct Authority has created a special regulatory sandbox where it can futureproof compliance with the latest technology. The future of these technologies is being shaped not just by disruptive startups and innovation consultants, but by banks and regulators too.
In a trial earlier this year, the government made welfare payments using blockchain for the first time. Using the same ledger technology that powers bitcoin transactions, the Department for Work and Pensions drastically reduced the administrative burden attached to benefits with the help of fintech startup Govcoin. Using technology to improve financial inclusion is crucial for society, the economy and business. As Robert Kay, the mathematician, former financier, and entrepreneur who is now chief executive of Govcoin, puts it:
“People who are on the fringes of financial inclusion, or who are financially excluded, need a special service which can give them instant access to their benefits — three days going through the banking system may mean using a payday lender, or being thrown out of your house.”
The Financial Conduct Authority is due to announce its third-round cohorts in November. As these firms work with regulators and the government to push the boundaries of this technology, the focus needs to be on improving lives, not just overcoming inefficiencies.
By harnessing new digital tools like smart contracts, we have an opportunity to redefine how government services engage and interact with the public. Fintech has provided innovators and pioneers with a new box of toys to play with, the challenge now is applying them to the services that we all rely on.