Every now and then a technology comes along that changes societies; when block-chain first emerged barely 7 years ago, no one thought it could be considered as potential replacement for the backbones of banking and exchange clearance systems, or at least not so soon.
Yet when we look at the possibilities of what a blockchain-driven society could enable; of instantaneous asset transfers, across borders, at little or no fee, with public scrutiny and (theoretical) immutability, we can’t help but feel that this technology is inevitable and inevitably going to be huge.
The very concept of money and how we transact with one another could fundamentally change.
When we combine that with the wider fintech revolution that is going on around the world, where financial services are being re-interpreted through technology, this makes for truly exciting times.
Why is it that buying shares in a publicly-listed company takes only seconds, but the actual full settlement takes 3 days?
Why is it that buying a house should necessarily take 4-6 weeks to complete, even if a buyer has the cash to buy it outright? Why can’t they buy it this minute, and sell it to someone else the next?
Imagine a world where we can do those kinds of transactions, at those speeds.
Imagine a public-private repository of personal data, powered by blockchain, where every bit of information needed to complete the purchase of a house is stored, and with the owner’s permission, accessed in matter of minutes or seconds to facilitate the completion of the purchase.
Imagine if in the next minute, someone else can interact with that home owner to buy that very house off from them, safely knowing that they were indeed the legitimate owner of that property?
What will technology like that do to our property markets, our share markets, our financial system?
These are the sort of questions we as technology investors ask ourselves everyday.
We then look for specific entry points with low enough hanging fruits and high enough yield potential, put enough capital behind these changes to catalyse them in the shortest timeframe possible.
The good news, or bad, depending on your point of view, is that this timeframe is constantly getting shorter.
In a rapidly-changing world, where global shocks can instantly affect the entire world’s economies (look at Brexit as an example), it would be very interesting to see how the incumbents would prevent themselves from being disrupted, and how the would-be disruptors pivot and adapt to realise their full potential.
For example, it wasn’t so long ago that Alibaba, today the world’s largest eCommerce player, went to their local banks and financial institutions to ask for help on payments and escrow functions.
The responses they received prompted them to create Alipay, now the largest payments platforms in the world if it were an independent company.
The banks in question made the assumption that Alibaba needed to come back to them at some future point, because they provided the trusted payments infrastructure that consumers are familiar with and confident of.
Financial figures for Alipay show that as of May 2014 they have processed USD $519 billion, with over 80 million average daily transactions.
Clearly consumers had a different idea to the banks around trust and confidence on their payments.
It is conceivable that if Alipay went all out on blockchain, the amount of transaction volumes they could handle would increase further.
What people need to realise about fintech disruption is that disruption comes not only from fintech startups, but also from tech giants, including giants with market caps larger than most banks or financial institutions.
Australia is uniquely positioned in the world of blockchain. As of now, we are the world-pioneers in the real-life adoption of blockchain technologies in any significant commercial undertaking.
Australian financial institutions stand in a terrific position right now, we have great blockchain talent in this country. Even the inventor Satoshi himself may yet be an Australian!
We have great regulatory support for blockchain at the moment, we have incumbent institutions all paying close attention to the subject.
The ASX and SSX are literally leading the world right now.
What the blockchain startups lack is scale of customer reach / trust / distribution, as well as regulatory knowhow & infrastructure; what the corporates lack is fast prototyping and agility.
The ASX and SSX are demonstrating this collaboration right now.
I recently came back from a market reconnaissance trip to China, and several institutional partners of ours, including an asset-management firm, a stock-exchange, and a tier-2 bank with “only 7 million customers” are all interested in Australian blockchain technology.
Australian businesses have a unique window to take up blockchain’s opportunities to drive a competitive edge in their offerings and improve their customer experiences.
The opportunities we are talking about are:
- an order of magnitude lower cost
- an order of magnitude faster transaction execution
- an order of magnitude simplified architecture (therefore higher efficiency)
Don’t wait until the potential for disruption is bleeding obvious and commonplace before you explore their potential, because by the time that potential is fully visible, it’s already too late.
You’ve already been disrupted.
Victor Jiang is a founding partner of Sapien Ventures
