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Advice and Information for Finance Professionals

Look to Emerging Markets for Cutting-Edge Blockchain Innovation

By Arun Khehar, SVP Applications ECEMEA, Oracle

Imagine you have a life-threatening allergy to shellfish. Your threshold for exposure is so low that even trace amounts of crustaceans or mollusks cause your throat to swell shut.

You may not dine out much at high-end restaurants in seaside cities—that is, unless you are in Dubai. In 2017 the Dubai government launched an app and website called Food Watch, which enables people to get detailed information about the food they order. With Food Watch, the government can trace the food journey from “farm to fork” and monitor food in more than 20,000 food establishments, as well as food suppliers. In turn, users can find out where food came from, how it was handled, and the conditions under which it was prepared.

Behind it all is blockchain.

Dubai and other emerging markets are leading the world in developing new applications for blockchain, which some have described as a new type of internet, but more secure. Much of the time, people equate blockchain with Bitcoin or other cryptocurrencies, but that is only one potential use for blockchain. The technology itself is agnostic and can be used in the public and private sectors for countless other transactions and services.

In developed countries like the United States, private-sector startups and a relatively small number of large companies are leaders in blockchain-based business models, but the biggest and boldest blockchain applications are coming from nimble developing nations.

How Emerging Markets Are Leapfrogging with Blockchain

An advantage for emerging markets is less (or a lack of) long-standing infrastructure and regulations, which in developed countries can slow widespread adoption of transformative technologies. By contrast, developing nations can invest in blockchain and other game-changing technologies as they build infrastructure instead of doing so as they replace infrastructure. This has been called “leapfrogging” and often is instigated through anti-poverty efforts to give disenfranchised populations access to banking, communications services, the internet, and other staples of everyday life in developed countries. A less robust private sector in developing nations also means that governments are more likely to be the drivers behind such efforts.

That doesn’t mean blockchain-driven change isn’t happening in developed nations, but it’s not happening in the same unified and rapid manner. Dubai, for instance, is working toward becoming the world’s first blockchain-powered government. Within two years, it plans to use blockchain-based applications to process more than 100 million documents a year for visa applications, bill payments, and license renewals. The secure digitalization of these transactions could save 25.1 million hours of labor—worth a savings of about US$1.5 billion.

The private sector is part of the transformation as well. The emirate is undergoing a real estate boom as it ramps up for a gigantic economic development conference in 2020, and newly built residential property is starting to be sold using Bitcoin.

Another blockchain leader in the Middle East is Saudi Arabia. The kingdom's central bank recently announced a partnership to enable banks to instantly facilitate cross-border payments. The agreement has the potential to transform banking for customers — who will have access to faster, cheaper, and more transparent transactions — and could change how banks send money globally. The Saudi central bank also is working with the United Arab Emirates central bank to issue a digital currency for use in cross-border transactions between the two.

Moving from the Middle East to Africa, European specialty coffee provider Moyee Ireland is using blockchain to transform the Ethiopian coffee supply chain for better efficiency and transparency. Moyee Ireland can authenticate that the coffee beans it roasts are sustainably and ethically sourced. For Ethiopian farmers, the hope is that blockchain-based supply chain transactions will help them earn more for their crops because they, too, can authenticate origin and purity.

Flowers are another major agricultural export for Ethiopia, but exporting a single container of flowers to Europe can require up to 200 communication transactions. A Singapore-based company wants to eliminate that manual effort and speed up deliveries by connecting supply chain participants through a blockchain network.

The Critical Components of Blockchain Innovation

As these examples show, blockchain technology can be used to build new types of trading and transactional infrastructures that are more automated and secure than existing models, and in many cases can be spun up quickly. This can happen at a national level or on a private one-to-one level; and like the Food Watch app, blockchain can further both public- and private-sector goals.

Tactically, blockchain—like the internet—needs applications and a network to become active and accessible. This can be done using a comprehensive enterprise-grade blockchain service platform like Oracle Blockchain Cloud Service, which is part of the Oracle Cloud Platform. Users can build a blockchain network and let Oracle manage the network infrastructure as they then build their own contracts and applications on top of the network.

Another critical component is buy-in from business leaders who oversee financial transactions and regulatory compliance. Understandably, these roles—usually in finance or operations—require assurances that risk can be controlled before applying any new technology. (It seems ridiculous today, but as the internet spread rapidly among business processes in the 1990s, many companies issued edicts that they would not accept digital invoices.)

One of the risks with blockchain is that public and private organizations take too long to identify and act on unique opportunities for resource savings and revenue growth. Don’t let this happen in your organization. Look to the many innovative applications far and near for inspirational models, and then partner with a proven technology leader that can provide powerful tools and guidance.

Want to see other innovations in finance? Check out Tomorrow's CFO in this video.

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