FinTech Futures: Demystifying blockchain
By Tine Holvoet, Senior Research Associate at Vlerick Business School
‘FinTech’ stands for technology-enabled financial innovation. FinTech is a buzzword, a very consensual topic that is not only associated with finance, but is linked to popular evergreens such as innovation, entrepreneurship, technology and design. It brings together two tribes, the so called ‘suits’, typical banker and insurer profiles, and the more creative and colourful ‘jeans’ or ‘techies’. From a societal perspective, it is a very exciting time to be involved in the financial industry today; we see IT specialists moving up the ranks, groups of un(der)-banked people are starting to be addressed, and apps emerge that actually work and solve old problems.
Critical in understanding the anticipation of FinTech, is the fact that finance involves us all. Indeed, FinTech can play an important role in building smart nations, harnessing technology to open opportunities and to improve the lives of citizens. Imagine the possibilities for financial services and products that are cheaper, more transparent and user friendly! Think of all the new quality jobs in finance and the availability of funding through the use of new digital technologies.
However, new risks regarding social exclusion and new forms of poverty emerge, not to forget constant societal insecurities regarding privacy and (cyber)security. That is why the argument for a proper understanding of FinTech rises. We still lack conceptual frameworks including FinTech’s 4 main drivers: technology, new business models, regulation and changes in user behaviour.
At Vlerick Business School we first learn from the past, building on our experience in studying the disruption in TIME-sectors (telecom, IT, Music & Entertainment). We update models to explain the strategic choices that organisations and governments currently can consider within the FinTech ecosystem. Building on this cross-industry knowledge is important, as what is happening in finance today, in fact follows structures and patterns of what recently hit the telecom and Music & Entertainment industry. We can go back to the ‘60’s and discuss similarities with the railway and machine tool industry. As much as we learn from the past, secondly, we proactively fill in the knowledge gap by providing vanguard updates on today’s challenges and label this endeavour ‘FinTech Futures’. With FinTech Futures, we share new, independent and impactful views. We invite international guests with mixed-backgrounds to experience future scenario’s first hand, to really get a grip on today’s buzzwords.
Blockchain is probably one of the first buzzwords that we should demystify.
In the quest of first-hand insights, obviously those people matter that coded the original blockchain technology around 2008 that is underlying Bitcoin, the now infamous digital currency. Given the underground character of the coders back then, and the open source format they were cherishing, it is a hassle to find out the names of key figures. Fortunately, the master students in the 2016 Vlerick FinTech bootcamp had the opportunity to witness Iain Stewart, code wizard and bitcoin researcher at Imperial College. He talks magic, he is able to pinpoint exact opportunities and limitations of blockchain technology, but his talk is hard to grasp when you are not a quantum computing specialist. The more general audience could not fully grasp why – according to Iain Stewart – blockchain is not to become scalable. However, one message made clear to everybody attending the talk is that we don’t need a 49th way to pay for coffee, as currently we probably have enough easy and affordable options. He pointed out that we shouldn’t focus on what blockchain is, moreover, we have to find out when blockchain makes sense!
Obviously, in order to speculate about our buzzword’s futures, you need to understand some basics, such as the meaning of a distributed – or more nicely expressed ‘shared’ – computerised ledger. This shared ledger allows users who do not know or trust each other to automatically keep track of every detail in their negotiation. A complex architecture underpinning their exchange, is designed to prevent manipulation, and very effectively rules out fraudulent behaviour. This can be useful in many situations, not only for payments. Think of diamond and drugs trade, smart contracts, or storing and sharing any kind of digital assets. Blockchain first surfaced in cryptocurrency applications such as Bitcoin, which showed us that we don’t need a third party – a middleman – to successfully process transactions between users. It can all be done digitally by a distributed computer network secured by cryptography, which makes transactions much more resistant to fraud, and obviously makes them cheaper.
Nevertheless, blockchain technology and it’s popstar Bitcoin should no longer be confused. That’s why a talk by Simon Taylor, co-founder of 11:FS and former Barclays blockchain tsar, is a genuine revelation. Simon Taylor understands blockchain technology in a much broader sense. According to him, “what is really interesting about blockchain is not bitcoin, it is the theory. We cannot explain or grasp blockchain, because we don’t have context yet. Remember people talking about ‘the web’?” When making the comparison, see blockchain as the internet, bitcoin would be more like yahoo… No need to explain why we put contextualising blockchain central in our first FinTech Futures event.