Financial inclusion,

something as simple as possessing a basic chequing account is significantly lacking in the Middle East, especially when compared on a global scale. Digital innovation, coupled with high mobile penetration rates, especially those aged 25 and under, can, however, open the door to reshaping the fate of the region’s estimated 85 million unbanked adults. According to the 2014 World Bank Global Findex Database, a report that measures global financial inclusion, account penetration in the Middle East, that is, individuals without access to even the most basic financial services sat at just 14 percent.

Furthermore, account ownership is at near-universal levels in high-income Organisation for Economic Co-operation and Development (OECD) economies, with 94 percent of adults from OECD nations having reported owning an account. Financial inclusion is critical for employment creation, for raising income levels and to consequently reduce poverty. To achieve inclusive economic growth, of course, requires the easing of barriers to accessing the broader financial system. The key to easing the barrier to financial access in today’s online environment is digital innovation, more specifically, advancement in financial technology and mobile banking.

The United Arab Emirates, one of the richest Gulf nations, has an internal battle amongst its top two cities. “There is a rivalry between Abu Dhabi and Dubai to become the fintech hub in UAE,” said Omar Soudodi, managing director of Dubai-based payments processor PayFort, as reported by Kadhim Shubber of the Financial Times, in December. Companies in the financial technology sector, including within the rapidly emerging space of blockchain technology, see the critical opportunity that exists for banking innovation. “More and more of the Arab millennials are getting into the banked world before they even graduate,” said Soudodi. “Before the trend was, ‘I graduate, I get a job, I get my first paycheck and think, oh my God, I need a bank account’.” There is potential to capitalise on the shifting demographic trends.

Changing Demographics

The UAE was cited by Google amongst the highest in smartphone penetration rates per capita as of September 2015. The UAE was in fact listed among global leaders with an overall smartphone penetration rate of around 75 percent. The mobile phone user base in the Middle East and North Africa region was second only to that in Asia-Pacific. “Just over 606 million people in the Middle East and Africa [region] have at least one mobile phone this year, and the total will pass 789 million in 2019,” reported eMarketer, an independent market research firm, in tandem with Starcom Mediavest Group as part of their 2016 Global Media Intelligence report.

The UAE has retained its regional standing as the highest per capita country for mobile phone penetration with an estimated 80.6 percent of the population reported to possess a mobile device. Further, this number is projected to inch up to 82.8 percent by 2019, as per the Global Media Intelligence report. From a usage perspective, the trend is similarly moving toward complete saturation. In 2012, only 54 percent of UAE users under the age of 25 went online using a smartphone at least as often as on a computer. This rocketed to 90 percent by 2015.

Fast-forward to data obtained in January 2017 and the trend upward continues, with the Internet and mobile use remaining high in the Middle East, according to We Are Social’s and Hootsuite’s Digital in 2017 Global Overview. Of an estimated total regional population of 246 million there are 147 million Internet users in the Middle East — a 60 percent penetration rate. Furthermore, there are 312 million mobile subscriptions, which amounts to a 127 percent rate against the overall population.

“You have a very young population, using modern technologies. Yet, the financial and banking side is lagging. Fintech therefore, can play a very important role in financial access and inclusion,” said Saidi. Top digital users are of course the youth segment, according to economist Saidi, who added, 60 percent of the population in the Middle East are aged under 30, which highlights the ripe opportunity to mobilise the current and upcoming generations.

Blockchain-Based Innovation

“The Arabian world is ripe for innovation,” said Mohammed Alsehli, chief executive officer at ArabianChain Technology, a Dubai-based software developer. “Blockchain technology is at the center of innovation in the region that is made possible by the direction and the vision of some of the countries here. In Saudi Arabia and the UAE it’s all about the digital revolution and how to digitally transform these countries in the future.” ArabianChain Technology, based in the Dubai Technology Entrepreneurship Center, recently launched its own public blockchain.

In addition to the blockchain, ArabianChain is developing a suite of blockchain-based features and products, including its own digital currency called DubaiCoin-DBIX (previously, DubaiCoin-DBIC), an exchange, and a regionally-focused marketplace. “DBIX is a secure and economical means to conduct payments and asset transfers,” Alsehli said. But ArabianChain is just a single player amidst a growing base of fintech ventures, blockchain-based and otherwise. Last September, the Dubai Future Foundation launched its inaugural Dubai Future Accelerators, a 12-week program connected international technology startups with government entities for the purpose of creating prototypes and pilots for the City of Dubai.

According to Bitcoin Magazine reporter Diana Ngo, The program “enlisted 30 companies with seven of Dubai’s public services: Health, Energy, Knowledge, Municipality, Police, Transport and the investment portfolio, Dubai Holding.” In fact, the United Arab Emirates is moving to adopt sweepingly adopt blockchain technology with aims “to become, by 2020, a leading centre for innovation and the first government in the world to execute all of its transactions on a blockchain.”

The power of this, from a financial inclusion and digital innovation standpoint, will be unmitigated access for a population that lives online, connected via a computer or mobile phone, with the latter’s penetration rate at a nearly universal level. Further, integration and adoption of a regionally-focused, feature-filled public blockchain has the capacity to heighten interaction and connectivity from business-to-business,  business-to-consumer, and peer-to-peer positions.

Daniel Diemers, a consultant with the strategy and consulting arm of PricewaterhouseCoopers, pointed to another reality in the region, that of disconnection, stating, “If you’re a payments fintech start-up in the UAE and you’ve gone through all the approvals, it [still] doesn’t give you passports in other Gulf countries.” ArabianChain and other public blockchains like Bitcoin have the potential to alter this dissociative relationship, allowing businesses and people to interact without thought of border, according to Alsehli.

Mobile banking and the advancement and adoption of financial technology applications can also shatter the often insurmountable barrier physical access predicates while alleviating costs to the account owner and the banking institution. In short, Blockchain-based innovation could mean significant progress by way of financial inclusion through digital. This guest article is authored by Brandon Kostinuk, communications lead at Vanbex Group, a Vancouver, Canada-based professional services firm and consultancy that specialises in the digital currency and blockchain technology sector.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

   Senators in the state of Nevada

have unanimously backed a proposal that would block local authorities from instituting taxes or fees on blockchain use. According to public records, after just over a month of deliberation, the Senate advanced the measure following a 21-0 vote, with zero abstentions. As CoinDesk reported last month, it’s the first measure of its kind that would prevent local officials from charging money to use a distributed ledger or a smart contract tied to one. Sen. Ben Kieckhefer initially submitted the measure on 20th March.

The bill stipulates:

"A local governmental entity shall not: (a) Impose any tax or fee on the use of a blockchain or smart contract by any person or entity; (b) Require any person or entity to obtain from the local governmental entity any certificate, license or permit to use a blockchain or smart contract; or (c) Impose any other requirement relating to the use of a blockchain or smart contract by any person or entity."

Other elements of the bill would clear the way for smart contracts and blockchain signatures to become acceptable records under state law, similar to a measure that was signed into law last month in neighbouring Arizona. The bill now moves to the Assembly – the lower chamber of Nevada’s bicameral legislature – for further consideration.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Recently, I posted an article relating to a conference on Financial Technology (FinTech) held at MIT. In that post, I discussed the advancement of technology in the United States financial system and reported on how far behind many experts believe the American financial system is in introducing technology to the US economic system. An interesting thread running through many of the sessions at the conference was the mention of Dubai as a leader in the advancement of blockchain technology.

Blockchain technology uses a digital ledger system to efficiently share and track information related to contracts and transactions. The records of the system are permanent, verifiable, and secure. The Blockchain Technology is the technology used to support the digital currency bitcoin. It was surprising to me to see an article by Nikhil Lohade in the Wall Street Journal on the efforts being made to turn Dubai into a blockchain center.

Mr. Lohade quotes the group chief information officer at Emirates NBD, Dubai's largest bank, Ali Saywani:

"The aim is to replace paper-based contracts with smart contracts that will help reduce complex documentation for the tracking, shipping and movement of goods."

"We have a very clear objective to make Dubai the capital of the blockchain industry," says Aisha Bin Bishr, director general of Smart Dubai, a government office tasked with facilitating innovation in the emirate. "By 2020, we'll have 100 percent of applicable government services and transactions happen on blockchain."

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Ripple is adding 10 new banks

and financial services providers to what it's now calling its "blockchain network". Founded in 2012, Ripple has raised nearly $100m for its distributed ledger tech and related payments products, but it has been increasingly active of late in seeking to formalize enterprise partnerships amid a wave of high-profile consortium efforts.

The new partnerships find Ripple showcasing its reach and influence. New members include MUFG (Japan), BBVA (Spain), SEB (Sweden), Akbank, Yes Bank (India), Axis Bank (India), SBI Remit (Japan), Star One Credit Union (US), EZ Forex (US) and Cambridge FX (Canada). In an interview, Ripple VP of product, Asheesh Birla explained the company is beginning to define its offerings in more collaborative terms. While its product allows for faster cross-border payments, Ripple is also creating a set of standards for banks to follow while using its underlying tech, he said.

Birla told CoinDesk:

"You need a whole ruleset, and that's why we call it a blockchain network and when we say that partners are joining, they’re actually agreeing to the standards and rules that accompany the technology as well.”

The new partner banks and companies are a mix of inbound and outbound services. As Birla explained, Indian banks Yes Bank and Axis Bank are receiving more cross-border payments rather than issuing payments out. MUFG in Japan, on the other hand, manages both. "They would be processing payments for a lot of Japanese that want to send money to other destinations like Turkey and India but then there’s a lot of demand for sending payments into Japan as well," he said.

Faster payments are one advantage, but members also cited other advantages. Evan Shelan, chairman of EZ Forex said, "The benefits [of the blockchain] are about adding the most advanced level of security to each payment through the distributive ledger for our financial institutions."

Global reach

Of course, a global network is perhaps a natural fit given Ripple's recent focus on the cross-border DLT opportunity. According to Birla, many banks are feeling the need to process more international payments than ever before. As such, Birla framed DLT as an advance that could help financial institutions with a broader set of problems. For instance, without a standardized procedure, he argued things gets messy when operating payments to several different countries.

"[Banks are] looking at this as a new kind of service that they can offer that would compete with a lot of the startups in their space," he said. Still, work needs to be done to boost the Ripple ecosystem, and Birla said that banks were chosen, in part, due to their expertise with their local regulatory environment.

Birla concluded:

"The reason that we chose to work with banks is that they are experts in local regulation. A lot of them have that pull and understand the regulatory environment and we built our product in such a way that it fits within the different regulatory schemes around the world."

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Blockchain: The Next Mortgage Industry Shake-Up?

It has been quite some time since a new technology came along that holds the promise of revolutionising the mortgage industry. E-signatures and e-mortgages still offer the promise of a major technology shift, but 17 years later, adoption of e-mortgage technology has been anaemic

Along comes a new technology: Blockchain.

Will blockchain finally be the game-changing technology for the industry? I believe blockchain will be the next big thing. Although there were high hopes that e-signatures would be the solution that finally improves the process, the industry has been slow to adopt e-signatures as the core game-changing technology – and for good reason. Switching to digital mortgages requires substantial process and technology changes. Also, digital mortgages require the mortgage ecosystem – from the originator to the title company, to a closing agent, to a county recorder, to investor – to support the “e” process. This has been an almost insurmountable hurdle to overcome.

Although it has been close to two decades since e-signatures became legitimate under the law, e-closings are still not commonplace for mortgages. It’s no fault of the technology, per se – clearly, using e-signatures can make life easier for borrowers. Yet, the mortgage industry is still a paper-and-ink industry that requires mortgage teams and customers alike to go to the title company’s office and sign stacks of documents by hand. This is where blockchain technology comes in. I believe that blockchain will ultimately become the tool that enables wider adoption of digital mortgages.

What is blockchain, and why should mortgage lenders care?

Most mortgage professionals have heard of blockchain, yet no one knows for sure how it will impact mortgage lending. Many in the industry believe that blockchain will be used for digital currency or high-frequency trading. But the fact is that blockchain-based technology holds the promise of creating a completely new basis for the digital mortgage without any of the previous hurdles.

Blockchain technology that is correctly applied to documents and data provides the same level of preservation of information, document integrity and tamper seal solutions as the original mortgage without requiring a completely reworked “e” process. Blockchain technology can work with digital signing or with a paper signing. Notary seals, recordation information, e-notes and paper notes, and video recording of closings can all be tamper-sealed and immutably recorded.

Why is that so revolutionary for the industry? Because if you use the right blockchain solution, it helps overcome the three previously mentioned hurdles that stopped e-signatures in their tracks: With blockchain, you don’t have to have everyone in the mortgage ecosystem agree to an e-mortgage document process, nor do you need everyone to support the e-signed documents. More importantly, blockchain solutions will not require lenders to retool processes, as blockchain technology sits as a thin layer on top of the existing document management system. Blockchain technology, when properly applied, has the ability to freeze a copy of signed documentation to prove that it has never been altered – and, further, that the original document is in its original location.

An enabler, not a replacement, of e-mortgages

Will blockchain replace digital signatures? It certainly has the potential to change the way digital signatures are utilized, but no, blockchain will not replace digital signatures. The goal is to help facilitate their use by making blockchain the fundamental enabling technology. As we’ve seen through their slow adoption, e-signatures are not the right tool to be the lead player, but they are still an important tool in the mortgage industry’s toolbox.

What blockchain technology will do is shift the way that the industry thinks about an e-mortgage. In the past, an e-mortgage was envisioned as a soup-to-nuts digital file that contained only digital documents and e-signatures – a configuration that was extremely tough to implement because of the hurdles described previously. Blockchain brings something new to the table by offering the mortgage team and customer the same benefits whether signing digitally or on paper. Again, e-signatures will become the technology that makes some parts of the mortgage process better for the consumer and the lender, but it won’t be the underpinning technology around a digital mortgage.

Building on the blockchain backbone

As we look back over the past 17 years of the industry’s anaemic attempt to get widespread adoption for e-signatures, it’s important to reiterate that this wasn’t a failing of the digital signature technology itself. Instead, the failure was because e-signatures required clearance of too many significant hurdles. Within this environment, blockchain has emerged as a problem-solving technology that doesn’t require the same level of clearance of the industry’s hurdles.

Blockchain offers a completely different baseline technology on which to build the digital mortgage. Although blockchain is poised to ultimately become bigger than e-signatures and replace them as the core driving technology, the ability to sign digitally will still be hugely important in the mortgage industry. Tools such as e-signatures, electronic closings and e-vaults are vital components of the overall e-mortgage solution.

What’s changing is that e-signatures will be replaced as the core technology behind e-mortgages. These components will need to plug into the blockchain backbone, which will become the linchpin that drives an electronic mortgage. Shifting the focus from e-sign tools to blockchain as the backbone for compliance and document management is a win-win, as it still allows for the option to insert e-signatures as needed along the way. In short, blockchain is the transformation in technology that the industry has needed for nearly two decades – one that will finally allow e-signatures to become incredibly powerful.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member