At its most basic, how do you define ‘blockchain’?
Simply defined “Blockchain” is a decentralised distributed ledger technology, where transactions are recorded and confirmed through a consensus logic, eliminating the need for a centralised authority / intermediary.
It is a record of events that is shared between many parties and once information is entered, it cannot be altered. Every participant has a copy of the Blockchain, which is updated automatically every time a new block is created.
Since the Blockchain database isn’t stored in any single / centralised location, the records are public, easily verifiable and no hacker can hack / corrupt it. Non-repudiation is a key attribute of Blockchain.
Of late we are hearing quite a bit in the news about cryptocurrencies like bitcoin and etherium. What is your take on cryptocurrencies becoming truly mainstream.
To me this is fairly straight forward, mainstream adoption of cryptocurrencies will happen when they acquire legitimacy on the regulatory front.
Currently there is considerable regulatory ambiguity on the status of cryptocurrencies with many countries treating them differently.
While some countries like USA, UK, Canada, Australia, Singapore and Japan have explicitly allowed their use, other countries like Bangladesh, China, Ecuador, India, Russia and Sweden have restricted the use of digital currencies.
Even in UAE, the government is deliberating whether to classify cryptocurrencies as a ‘commodity’ or a ‘currency’.
Overall there is a need for greater regulatory maturity, which needs to evolve before cryptocurrencies like Bitcoin can hope to gain full-fledged acceptance.
This is not going to be something immediate and comes with its own challenges.
For instance, there is definitely an awareness gap. Similarly concerns around cyber-security and consumer protection are other hurdles.
There is quite a bit of talk about the appreciation of Bitcoins and their potential as an investment.
One of the reasons for the recent appreciation of the value of Bitcoins is the greater legitimacy that it has been acquiring.
Take for instance Japan. In April, the Japanese government, in a key development recognized Bitcoin as legal tender.
This, in turn spawned several new Bitcoin exchanges in the country, making it more attractive to traditional retail investors.
There is a growing belief that Bitcoin prices are going to go up in the long term and this has become a self-fulfilling prophesy.
That being said, my take is that the recent rally and the volatility that you see is driven by speculation.
While I will not comment on how prices may evolve in the future, what I can confirm is that it will remain a highly volatile investment.
At least for the time being, Bitcoin’s volumes resemble a mid-cap stock, and volatility will partly be driven by holders of large proportions of the total outstanding float.
For Bitcoin investors with large holdings, it is still a challenge to liquidate their positions without substantially moving the markets.
On an everyday level, how can consumers benefit from advances in these technologies that we are hearing about?
Personally, I am a big champion of Blockchain and foresee its disruptive potential not merely in the financial services industry but across a gamut of industries.
Fundamentally what Blockchain does is establishing transparency and trust and thereby reducing transaction costs.
We have already seen its use cases in financial services, where it enhances the speed, security, transparency and cost effectiveness of financial transactions.
While the financial services industry was forerunner in the use of distributed ledgers other industries are fast catching up.
Today we are seeing Blockchain solutions being leveraged across multiple industry use cases ranging from public services, healthcare, supply chain and insurance amongst many others.
Given its disruptive potential, we should expect usage of distributed ledgers to become ubiquitous across industries reshaping how we transmit and retrieve transactional information.
On the face of it, the average consumer may never know about blockchain, but indirectly he will reap the benefits of the efficiencies it brings forth across industries in his everyday life.
How has the Middle East treated the rise of cryptocurrencies and technology like blockchain? Has it embraced it? Or is the region lagging behind the rest of the world?
Unlike the other developed and emerging markets, Middle East is yet to fully embrace cryptocurrencies.
That being said, the region is seeing growing interest in Blockchain, within industries such as banking & finance, supply chain management, healthcare and shipping sectors.
A good example of Blockchain adoption in the region is the move by the Dubai government to underpin the majority of the emirate’s business using a shared Blockchain platform both by government entities and the private sector.
It envisions to make government services more efficient and convenient for the various enterprises conducting business in Dubai.
Similarly the Central Bank of the UAE is a key partner and catalyst, who is working with participants in the financial system to ensure that they are fully compliant, when adopting Distributed Ledger technologies for various use cases.
Also the innovation ecosystem in the region is vibrant with global technology firms collaborating with local operators and start-ups to test and pilot the technology for potential use cases.
Specific to the Money Transfer industry what are your thoughts about Bitcoin and Blockchain and the impact these can bring forth
Distributed ledger technologies like Blockchain hold strong potential to enhance efficiencies in the money transfer industry, be it for the KYC process or for enhancing efficiencies in clearing and settlement processes.
Globally, we are already seeing strong adoption of Blockchain based solutions with the emergence of various private consortiums.
In fact as UAE Exchange, we are ourselves part of few Blockchain consortiums specifically targeting the remittance segment.
When it comes to cryptocurrencies and money transfer, on the face of it many people see merit in the use of bitcoin as a settlement medium by virtue of its ability to settle cross-border payments without a centralised intermediary like SWIFT.
For argument sake let’s say this arrangement can work seamlessly and ignore issues like volatility risks that are inherent in this model.
What I want to remind you here is that the greatest cost and complexities in International money transfer comes from the first mile and the last mile and settlement is one of lesser worries.
As an International money transfer operator, you have the challenges of licensing and complying with a myriad set of requirements across multiple countries.
Similarly with a quarter of the global population being financially excluded, the last mile, retail touch-points are the lifeblood for many immigrant communities in the developing world.
These are ground realities of the industry and cryptocurrencies are not ready yet to address these challenges.
Again in the context of blockchain, what is UAE Exchange doing to ensure it keeps its products ‘current’ in an ever-changing world?
Financial Technology has been advancing at a fast pace and the pace of this change is only expected to increase as we move ahead.
At UAE Exchange, we have always been a trail blazer in the industry regionally, be it in terms of innovations in services or technology adoption.
As part of our Fintech initiatives, we have been strategically investing and partnering with various Blockchain entities.
The first half of 2017, saw us join Bankchain, a consortium of banks who are building Blockchain solutions for a range of industry use cases.
Recently we completed a strategic investment with Loyyal, a start-up building a Blockchain based global loyalty network.
Loyyal is widely recognised as one of the most innovative Blockchain start-ups globally.
We are in the process of collaborating with Ripple, for real-time cross border payments.
We are also in discussions with multiple start-up incubators and start-ups in the UAE, many of whom have approached us with Blockchain use-cases for partnership opportunities.
What’s the story behind your business?
The UAE Exchange Group always strived to be customer and innovation-centric since its inception in 1980.
Over the years, we have built a conglomerate with category leaders in the money transfer, foreign exchange and payments.
From a largely middle East based player in the late 90’s we have now evolved into one of the largest global operators in the space.
Today, our group – UAE Exchange, Xpress Money and Travelex - has a direct presence across 45 countries and indirectly in 165 countries through an agency network.
We have a 6.75% market share of global money transfers and 7.1% in global retail foreign exchange volumes.
We have continuously reinvented ourselves over the years staying agile in our ability to respond to customer and market demands.
Our focus has always been to put the customer at the center of everything we do.
Attuned to needs of today’s “connected customer” we deliver a broad range of self-service channels including online, mobile and kiosks for them to engage our services when they want it, where they want it.
Having been in the industry for the last two decades, I firmly believe that “change is the only constant” in Financial Services.
Today we are collaborating with some of the leading global fintech entities and multiple start-up incubators to further our digital ambitions.
I am particularly proud of our association with StartAD, ADGM and the DIFC Fintech Hive and have high expectations in their ability to transform the fintech landscape regionally.
How do you see the financial services industry evolving in the next five years?
If you ask me about the industry the way I see it, money transfer and payments are evolving from standalone services to being embedded into a range of customer experiences.
This is also a function of the industry convergence that we are seeing today.
From a customer’s perspective, the onus shifts to how well you cater to understanding the financial needs continuum of a customer versus offering discrete services.
The implication here is that providers in the space need to work towards creating an experience that is Simple, Seamless and Secure.
The importance of the ecosystem partnerships will begin to emerge and collaboration between industry participants will become critical for success.
Regionally too, regulators are encouraging innovation in financial services. Examples of the same include the regulatory sandboxes initiatives by the DIFC and ADGM.
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