Daniel Paperny for Fintech Australia
Smart contracts should be focused on integrating real-time payment and delivery mechanisms to realise the full potential of blockchain, according an EY expert told a breakfast held as part of the Intersekt fintech festival.
Speaking at the VIP Blockchain Breakfast hosted by EY and Fintech Australia, EY global innovation leader of blockchain technology Paul Brody said a common misconception with blockchain was that its application was limited to the clearing and settlement of payments and financial transactions such as share trades.
However, Brody affirmed there was a broader array of rich possibilities for blockchain use cases beyond the traditional terrain of financial services, particularly when it came to the use of smart contracts in real-time and across different industries.
“Our vision is that smart contracts should be all about integrating both payment and delivery mechanisms in real-time instead of those things being entirely separate when using distributed ledger technology,” Brody said.
“Blockchains are not just for payments however … and our expectation at EY is that this year we will see the first large scale blockchain implementation outside cryptocurrency and bitcoin.”
According to EY and FinTech Australia’s 2017 Census that will launch tomorrow, currently 5 per cent of Australia’s fintech ecosystem is comprised of blockchain or distributed ledger solution start-ups.
AgriDigital co-founder and non-executive director on Fintech Australia’s board Emma Weston said that while on the supply chain side, there seemed to be currently a significant amount of experimenting with blockchain across financial services, its use cases to date were largely “very specious”.
She noted the deployment of smart contracts within Australian health care and government services spheres remained far more promising for large-scale implementations of the technology.
“Some of the use cases we’re seeing for blockchain are really manifest in anything that touches multiple participants who stand to gain from sharing information or processes,” Weston said.
“While there is only a very thin sliver of finance currently being looked at, I think the deployment of blockchain in government services in particular is a very interesting one because that’s where you can get scale very quickly.”
Fintech Australia chair and panel moderator Simon Cant spoke of the present limitations of blockchain for corporate institutions in Australia particularly in the areas of scalability, security and authentication.
He questioned whether Australia’s readiness to transition to a contactless payments environment, coupled with the sheer presence of payment terminals across the country had cultivated a culture of complacency and a failure to be more proactive when it came to realising genuine applications of blockchain technology.
“Australia has the largest number of payment terminals per head of population anywhere in the world and we were one of the fastest to adopt touchless payments but does that represent our biggest vulnerability as a nation in that we have a pretty good system now that doesn’t need fixing?”
Cant said the need to improve dwindling levels of trust among incumbent financial institutions and the greater efficiency of finance was among his key observations from a recent trip to Shanghai.
He said incumbent Chinese banks had turned to blockchain amidst a climate punctuated by nascent payment disruptors and the Chinese government’s growing interest in forming its own digital currency.
“Payments has been a key disruptor in China over the last few years and has leapfrogged because there was such a hunger and natural need for a new payments system; that same vacuum exists in relation to trust between businesses,” Cant said.
Andrew Han, Vice General Manager of Gingkoo Financial Technology, said the increasing prevalence of tokens and digital currencies like bitcoin was problematic for governments and regulatory bodies in that they were often plagued by issues of security and there was a need to build “a greater connection between the cryptocurrencies and the regulators”.
Cant added that bitcoin to date was substantially limited due to only being able to handle seven transactions per second, which was “completely inadequate” for a digital currency that is to be powered by a global ledger.
“We’ve had a number of key institutions here in Australia that have recognised the power of blockchain technology and digital currencies but also recognised the drawbacks of some of that technology as well such as scalability,” Cant said.
“We are going to be able to handle much more than seven per second in the future but it’s still fairly limited and that’s been one of the first real problems for interested parties.”
Daniel Paperny was formerly a senior journalist for trade publication Financial Observer and now works as an Account Manager for Media & Capital Partners.