Monday, February 16, 2015

One Billion Hidden Blockchain Consumers

Banking Africa Continent of Dreams Economist 2013
Over one billion hidden consumers are in need of services that blockchain technology can provide. Africa is one consumer market that lays virtually unclaimed. African markets start from the ground up rather than the top down. Infrastructure is relatively inexpensive compared to many countries. When attempting to centralize modern businesses, upgrading hardware or software of local branches is difficult to do correctly when updating outdated systems. For a larger company, to create a new branch, financial data and records dating from the 1960's must be transferred and updated to a new system. That creates the struggle, normally, when attempting to modernize entry into new markets.

Business that offer traditional banking services are now expanding into these new regions and running into hurdles. To become the market leader in these regions, businesses must build their brand from scratch, which is causing slow distribution. Retail banking must rely on organic growth. Consumers must be able to gain access to their funds, and is the reason that many new financial institutions need multiple branches to start.

Mobile banking is the primary way to transfer funds in developing markets. Very few Africans have access to international banking for that reason. This leads as a bridge for innovation of blockchain services to reach those one billion previously unobtainable consumers. The International Monetary Fund has taken note of Africa's fast growth, as well as their fast adoption rate of non-traditional financial services (IMF, March 2013). Payfast is an example of a popular nontraditional service that offers African businesses an online payment process and is the current competitor to future blockchain services. African nations are also educating themselves about digital currencies as much as western countries. Google search trends show Ghana surpassing other major countries in searches over the last few months in relation to blockchain and bitcoin services.

One group that has shown a spotlight into Africa's rising mobile banking market is the Bill and Melinda Gates Foundation. Last month, the foundation made a proclamation that mobile banking will be a part of the solution to improving the lives of about 2 billion poor individuals. CGAP is a non-profit mentioned in the Bill and Melinda 2015 annual letter and is moving to increase financial inclusion to improve the lives of the poor. A published report from CGAP states that 36 new businesses have already started to move into Africa's digital market (January 2015). I recommend taking the time to read the Bill and Melinda Gates Foundation's 2015 Annual Letter, for more information on the growing interest in mobile markets.

Blockchained services are forming to create solutions to not only growing markets, such as Kenya and Ghana, but also Western countries as well. Blockchained companies are not limited to many regulations and countries are attempting to secure this technology as best they can as it evolves. The Crypto Currency Security Standard was drafted as a benchmark for blockchained companies and is a collaborative effort from industry leaders. Similar to the W3C, the Crypto Consortium is a guideline for companies that use blockchain and bitcoin technology and provides certification of their level of knowledge of crypto-currency use. Certification and security are the biggest concerns for consumers in the early adoption phase of crypto-currencies and blockchain technologies.

As businesses begin to emerge in the technical space of blockchain technologies, educating yourself is the most effective loss prevention technique. Provided in the external links section is a non-technical video of Bitcoin and the basics of blockchain technology in use today. The CCSS certification test provides a list of reference material for the CBP certification exam that is provided on the side. Companies attempting to create appeal in these new markets would want to have this and similar certifications. The difficulty of creating these new products from blockchain technology will become smaller as more products are developed. If you were concerned about the technology at this point, you do not have to enter a decentralized market. I will highlight the mobile markets in Africa later in the week. What other services could adopt this technology?