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Open Banking Sparking a Wave of Innovation in Financial Services by EOS Intelligence
by EOS Intelligence EOS Intelligence No Comments

Open Banking Sparking a Wave of Innovation in Financial Services

The adoption of open banking is leading to innovation across financial solutions such as account-to-account payments (A2A), personal finance management (PFM) apps, embedded finance, and banking-as-a-service (BaaS) by enabling real-time data-driven insights and personalized financial services. It is paving the way for a more dynamic financial landscape. Open banking has evolved rapidly since the revised Payment Services Directive (PSD2) came into force in Europe. While challenges exist, adopting open banking solutions, aided by introducing regulatory and security measures, holds the potential to revolutionize the financial services sector.

The introduction of APIs transformed banking services

Open banking has emerged as a transformative force, changing how financial data is shared, and services are offered to consumers. It securely provides third-party financial service providers access to consumer’s financial information with their consent through an application programming interface (API). It aims to foster innovation in financial services, encourage healthy competition, and give consumers more control over their banking information. Several banks across countries, including Citi, Barclays, and Deutsche Bank, have started providing access to their APIs.

Regulatory initiatives and consumer demand lead to open banking growth

While open banking has existed for a long time, it gained traction when the PSD2, a European regulation focused on creating a more open, competitive, and secure payment landscape across Europe, came into effect in 2018.

Since then, several countries have introduced open banking regulations to support its adoption. For instance, in the UK, the open banking initiative, led by the Competition and Markets Authority (CMA, the UK’s principal authority responsible for strengthening business competition and preventing anti-competitive activities), became effective in 2018. In addition to the European countries, Australia, New Zealand, Brazil, and South Africa, among others, have introduced regulatory measures to drive the adoption of open banking.

Countries across the globe are adopting various approaches to open banking, including regulatory-led, market-led, and hybrid approaches. While Europe has taken a regulatory-led approach, adopting open banking in the USA, Canada, and China is driven by consumer demand and technological innovations. Consumers prefer to have control and transparency over their financial data. While there are currently no regulatory frameworks for open banking in the USA, the Consumer Financial Protection Bureau (CFPB) has proposed rules to protect consumer data rights, which will aid in facilitating the adoption of open banking.

Several countries, such as India, South Korea, Japan, Hong Kong, Russia, and Singapore, have adopted a hybrid model, including both regulatory and market-led initiatives. These countries do not have mandatory open banking regimes, but policymakers are looking to introduce initiatives to accelerate open banking adoption. For instance, in Singapore, the Monetary Authority of Singapore (MAS) and the Association of Banks have published an API playbook. This publication aims to support data exchange between banks and fintech players.

The growing emphasis on introducing regulatory measures to ensure data security will likely drive the adoption of open banking.

Open Banking Sparking a Wave of Innovation in Financial Services by EOS Intelligence

Open Banking Sparking a Wave of Innovation in Financial Services by EOS Intelligence

Open banking is driving innovation in financial solutions

The adoption of open banking is transforming financial solutions, including A2A payments, variable recurring payments (VRP), PFM apps, BaaS, and embedded finance, by enabling faster, more convenient, secure, and personalized financial services.

A2A payments and VRP

Open banking allows secure access to real-time bank data to third-party providers, enabling process automation, speeding up A2A payment transfers, and providing a better user experience. Increasing adoption of open banking globally is expected to make international A2A payments more viable and secure.

Digital wallet platforms such as Apple Pay, Google Pay, and Stripe are looking to integrate open banking on their platforms to provide enhanced user experience. In September 2023, Apple soft-launched a new iPhone wallet app in the UK integrated with an open banking framework to replace traditional banking apps as the preferred platform for accessing information related to their account balance, spending history, etc.

Open banking also encourages the widespread adoption of variable recurring payments by giving consumers more transaction control and transparency. The use of variable recurring payments is expected to increase across various commercial payment services, such as utility bills, subscriptions, and insurance premiums, in the coming years.

PFM apps

Access to financial data enables PFM apps to share more effective and personalized financial advice with consumers. A real-time snapshot of the overall financial health of the consumers helps them make long-term financial decisions.

BaaS

Banking-as-a-service platforms are likely to develop due to the adoption of open banking, allowing non-banking entities to provide financial services without becoming certified banks. This offers consumers a variety of payment and credit options, as well as more personalized finance solutions, expanding the industry offering.

Integrating BaaS in retail is being explored to improve customer loyalty programs and provide seamless payments. Also, the scope of services is likely to expand rapidly, from offering banking services to individual consumers to small and medium-sized enterprises (SMEs) and large corporations in the near future.

Embedded finance

Open banking has become the driving force behind the rise of embedded finance, enabling businesses and corporate clients to enhance operational efficiency and user experience. While retail and e-commerce platforms are some of the first to adopt embedded finance, the adoption is likely to increase in less digitalized spaces such as real estate as well.

Synergy with AI and blockchain offers scope for advanced innovation and security

Open banking provides a data-rich environment by aggregating data from various financial institutions for AI algorithms to analyze and utilize for decision-making. It is expected to benefit AI algorithms further by incorporating new features such as data categorization and anomaly detection in the coming years.

On the other hand, AI is likely to increase the effectiveness of open banking by analyzing individual consumer data and enabling the offering of personalized services. AI and open banking will likely help financial institutions develop innovative products.

While both AI and open banking complement their financial services, they can lead to data misuse or unauthorized access concerns, highlighting the need for strong regulatory measures to keep up with the evolution of open banking and AI.

Blockchain technology will likely become more common in open banking as it will enhance the security and transparency of financial transactions. It will likely reduce the risk of data breaches and unauthorized access to consumers’ finances. Additionally, it will likely make it easier for consumers to share their data by simplifying the authentication and consent processes.

Open banking services have expanded from basic payment initiation to open finance

The open banking framework has evolved from basic account information and payment initiation services to open finance, including access to data from various accounts, including savings, investments, pensions, insurance, and mortgages.

Countries such as India, South Korea, Australia, and Brazil have moved from open banking to open finance to develop a more connected financial ecosystem. In February 2024, South Korea also introduced two initiatives focused on including business data and providing offline open banking services.

In Europe, the European Commission is also pushing towards open finance by introducing the Financial Data Access (FiDA) regulation, a framework to enable secured sharing and access of financial data.

Open banking will diversify consumer options, with non-financial companies such as telecom providers, e-commerce platforms, and utility companies offering innovative financial products. They will likely enter into partnerships with banks to provide integrated services to consumers, enhancing their offerings and creating an interconnected financial ecosystem.

Lack of standardized APIs affects the open banking adoption

While open banking is gaining traction, specific challenges, such as lack of standardized APIs, integration with legacy systems, privacy compliance, and data security, are affecting its adoption.

The lack of standardization of APIs across financial institutions is the key challenge in adopting open banking. Third-party providers are usually unable to adapt to different APIs and provide seamless data sharing between systems.

Various financial institutions also face difficulty integrating open banking into their legacy systems, making the integration process complex and expensive. Banks must first update their systems by investing in technology upgrades and partnering with fintech solutions providers to overcome integration challenges.

As the adoption of open banking increases, the chances of data breaches might also increase, highlighting the need to protect customer data and compliance with privacy regulations. Banks are looking to adopt measures such as encryption, clear usage policies, and regular audits to protect customer data. The European Union has also put regulations such as the General Data Protection Regulation (GDPR) and the Digital Operational Resilience Act (DORA) in place to protect customer data and improve the digital security of financial institutions. Advanced security measures solutions, including tokenization and dedicated API gateways, can also help safeguard customer data.

Lack of awareness among consumers is another key challenge. Users are often unaware of open banking and are reluctant to share their financial data due to privacy concerns. Initiatives aimed at educating the users about security and regulatory norms related to open banking by banks can help overcome this challenge and drive adoption.

EOS Perspective

The shift to an open banking model can transform the future of digital banking. The key driving factors for the users are the ease and clarity of the interface, which are likely to replace the traditional banking infrastructure and ownership of consumer data.

The expected introduction of PSR1 in 2026 will likely improve competition and consumer protection in the payments market, which will likely drive the adoption of open banking. PSR1 will help enhance fraud prevention, improve consumer rights and protection, standardize payment regulations, and enhance open banking functions.

The introduction of regulatory and security measures and growing awareness about open banking and its benefits are also likely to aid this growth. A phased implementation of open banking will help with greater adoption of open banking by gradually introducing the concept to the consumers and helping them adapt.

Open banking will benefit banks by providing better customer insights, encouraging innovation, and creating an additional revenue stream through API monetization. However, increasing competition from fintech and non-financial institutions entering the market will likely pressure banks to transition to open banking. The shift to open finance will further increase the competition in the industry. We will likely witness banks entering partnerships with fintech players to develop and offer innovative financial services for their consumers.

The financial sector is embracing open banking as a means to offer creative and innovative financial solutions to enrich the user experience. Open banking will likely evolve into a broad ecosystem of connected services, streamlining the consumers’ products, services, and applications into one, providing a seamless experience.

What’s Fueling Asia’s Drive to Develop Wholesale CBDCs by EOS Intelligence
by EOS Intelligence EOS Intelligence No Comments

What’s Fueling Asia’s Drive to Develop Wholesale CBDCs?

The emergence of Central Bank Digital Currencies (CBDCs) has become a central focus in the global financial space, as it offers the potential for revolutionary shifts in how the world conducts and manages monetary transactions. While much of the spotlight has been on retail CBDCs, wholesale CBDCs are gaining momentum globally. Asia is leading the pack in developing wholesale CBDCs that offer opportunities that may significantly impact the global financial landscape.

Asia is outpacing developed countries in the drive toward wholesale CBDCs

Wholesale CBDCs are digital forms of a country’s fiat currency. Unlike retail CBDCs, only a limited number of entities can access wholesale CBDCs, which are designed for undertaking interbank transactions and settlements. The concept of wholesale CBDCs is similar to currently available digital assets used for the settlement of interbank transactions, with the key differentiation being the use of technologies such as distributed ledger technology (DLT) and tokenization.

Wholesale CBDCs have garnered global interest with central banks. Facebook’s (albeit failed) attempt to launch its Libra cryptocurrency in 2019 was a breaking point for blockchain technology’s use in global finance, eventually spurring the development of wholesale CBDCs. Initially launched as a measure to counter private cryptocurrencies, wholesale CBDCs are fast emerging as a potential disruptor in the fintech space.

Currently, more than 30 countries are researching the use of wholesale CBDCs. Interestingly, about half of these countries are from Asia. The development of wholesale CBDCs in Asian countries has outpaced the efforts of financially strong economies such as the USA and the UK, as these CBDCs offer more tangible benefits to developing economies in Asia than their more developed counterparts.

Several Asian countries have engaged in pilot programs, and proof-of-concept runs to explore the use of wholesale CBDCs to improve the efficiency of domestic large-value transactions and cross-border transfers.

China has been at the forefront of the development and widespread testing of wholesale CBDCs. Several Southeast Asia and the Middle East countries, including India, the UAE, Thailand, and Singapore, have launched pilot programs to explore the viability of wholesale CBDCs and test interoperability for cross-border transactions.

Achieving faster and cheaper cross-border transactions is key to Asian central banks

Growth in global trade has resulted in exponential growth in cross-border transaction volumes. However, these cross-border transactions are faced with challenges. There may be involvement of potential intermediaries, varying time zones, and regulatory frictions that may cause slower settlement. Financial systems such as SWIFT have a stranglehold on the cross-border transaction ecosystem, with many of these transactions using SWIFT messaging to settle payments.

Potential intermediary fees and forex-related charges also lead to increased transaction costs. According to World Bank’s estimates, transaction costs for cross-border transactions may range up to 6% of the transfer value, a significant surcharge.

Removing friction associated with cross-border transactions is a key goal behind Asian countries’ push toward exploring wholesale CBDCs.

A growing interest in wholesale CBDCs is attracting investments in building large-value payment infrastructures in Asia, allowing for faster and more efficient cross-border transfers. Wholesale CBDCs enable central banks to transact directly with each other, removing the involvement of multiple intermediaries and resulting in quicker transaction settlement. This also results in the elimination of intermediary fees to help lower transaction costs.

Technology also adds elements of security and traceability to these digital transactions. It also offers the potential to program them by automating or restricting payments if certain conditions are met.

Challenging US dollar dominance in cross-border settlements offers additional motivation

Several Asian countries are also looking to reduce their reliance on financial settlement systems that involve US dollar reserves. Currently, most cross-border transactions involve the use of the US dollar. Countries with limited forex reserves also face the challenge of outgoing reserves, resulting in potential currency inflation and adding to the already high transaction costs.

Wholesale CBDCs offer several Asian countries, particularly those with limited US dollar reserves, an opportunity to directly transfer the amount in their local digital currencies and eliminate the need for US dollars in bilateral transactions.

Developing Asian economies, such as China and India, with significant cross-border transactions, are looking to promote their CBDCs as a potential reserve currency in the Asian region that would allow cross-border settlement directly in the digital currency. It is also in the interests of countries such as China to develop its CBDC (e-CNY) as a potential alternative to the US Dollar in cross-border trade to mitigate any potential currency-related challenges posed by economic sanctions from the USA and EU.

What’s Fueling Asia’s Drive to Develop Wholesale CBDCs by EOS Intelligence

What’s Fueling Asia’s Drive to Develop Wholesale CBDCs by EOS Intelligence

Tandem development and collaborations offer tailwinds to CBDC projects in Asia

Central banks of several Asian countries are undertaking information sharing and tandem development of CBDC infrastructures to mitigate some challenges associated with CBDC.

Recent pilot projects such as mBridge, launched by central banks of China, the UAE, Thailand, and Hong Kong, have been testing the use of a common ledger platform for real-time peer-to-peer transactions. The launch of several other projects, such as Project Mandala (involving Singapore, South Korea, and Malaysia) and Project Aber (involving Saudi Arabia and the UAE), is laying the groundwork for the widespread implementation of wholesale CBDCs.

Another potential avenue for collaboration includes forming partnerships with central banks to maintain reserves of digital cash to facilitate direct settlement. China, in particular, plans to develop e-CNY as a potential reserve currency alternative to the US dollar.

Interoperability and ownership are key challenges to CBDC implementation

While the use of wholesale CBDCs certainly comes forward as a boon, there are challenges in using these technology-driven digital currencies. CBDCs may have varying protocols, and interoperability between different CBDC frameworks remains a key challenge for implementing wholesale CBDCs for cross-border transactions.

Establishing common technical and operational standards is essential to ensure CBDC interoperability. Currently, most pilot programs involve CBDCs with common or similar technological frameworks and rules, which limit the application of wholesale CBDCs to a certain number of compatible entities.

Recent research projects are laying the groundwork for CBDCs’ compatibility with various ledgers and technical frameworks. However, significant testing will be required before compatibility can be established across the Asian region.

Ownership, governance, and regulatory oversight of wholesale CBDC technologies are other key concerns. Doubts exist over who will oversee the transactions and ledger entries, especially for any multi-party cross-border transaction.

Systems must also to adhere to anti-money laundering and counter-terrorism financing regulations. Varying financial laws may also hamper the seamless implementation of these anti-money laundering and counter-threat funding regulations across the region.

Lastly, like any digital asset, CBDCs are also susceptible to cyberattacks.

EOS Perspective

Wholesale CBDCs can potentially change the nature of cross-border transactions across Asia and globally.

We are likely to witness significant growth in test runs and pilot programs by several Asian countries to provide proof of concept for the applicability of wholesale CBDCs in countering the challenges associated with cross-border transactions. We can expect a spurt in CBDC alliances and treaties among countries with significant bilateral and intra-regional trade. Simultaneously, it may result in slightly reduced transaction volumes going through existing cross-border financial systems such as SWIFT.

The next stage of CBDC evolution is likely to coincide with the emergence of pilot programs involving multiple CBDCs with different technological frameworks, creating possibilities for easier and seamless cross-border transactions among banks or countries without any existing bilateral or regional partnerships.

These developments are likely to be aided by the development of enabling technologies such as RegTech (regulatory technologies) and SupTech (supervisory technologies), which could provide the sandbox environment for widespread testing of the CBDC systems, as well as lay the groundwork for potential regulatory systems to manage these infrastructures.

With the bulk of cross-border transactions still being conducted in the US dollar, wholesale CBDCs do not pose any imminent threat to its dominance. The US dollar’s future prospects in this role will depend on whether digital currencies such as e-CNY take off as a reserve currency, which is unlikely, at least in the short- to medium-term.

The overall success of wholesale CBDCs will depend on the level of cooperation that countries across Asia can develop over the next few years.

eNaira Is It Here to Stay or Are Nigerians Going to Say ‘Nay’ by EOS Intelligence
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eNaira: Is It Here to Stay or Are Nigerians Going to Say ‘Nay’?

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Although Nigeria boasts about its digital currency launch, there are contradictory opinions about eNaira’s subsequent adoption. The eNaira has the potential to impact Nigeria’s economy positively, however, it is not possible without its widespread acceptance.

CBDC – A global picture

Central Bank Digital Currency (CBDC) is virtual currency or money issued and controlled by a country’s central bank. According to the Atlantic Council, a leading US-based think tank, 130 countries were considering a CBDC as of September 2023, while only 35 countries were exploring a CBDC as of May 2020. This steep rise in the number of countries considering CBDC in a span of just over three years shows an increasing interest in CBDC across the globe. Even more so, some 64 countries are already in an advanced phase of exploration of the currency (development, pilot, or launch phase).

Among the G20 countries, 19 are in the advanced stage of developing CBDC, and 9 out of these 19 G20 countries are in the pilot phase. There are some 11 countries that have launched a CBDC. China’s CBDC is in the pilot stage and is presently reaching 260 million people taking part in this pilot while being tested in more than 200 scenarios, including e-commerce, public transit, and stimulus payments. In Europe, the European Central Bank is currently on course to start its pilot for CBDC, the digital euro.

More than 20 other countries are stepping towards piloting their digital currency in 2023. Countries such as Australia, Thailand, and Russia plan on continuing pilot testing. Brazil and India intend to launch their CBDC in 2024.

eNaira – A choice or compulsion?

eNaira is Nigeria’s digital currency, issued and regulated by the Central Bank of Nigeria (CBN) for retail use. It is a liability of the CBN, similar to coins and cash.

Cryptocurrencies such as Bitcoin and Ethereum are similar to eNaira in terms of the underlying Bitcoin technology. Apart from this, both cryptocurrencies and eNaira are stored in digital wallets and can be used for payments and digital transfers across the globe to anyone with an eNaira account at no cost.

However, what makes eNaira different from Bitcoin or Ethereum is that the CBN has access rights controls over the Nigerian digital currency. Secondly, the eNaira is not a financial asset but rather a digital form of the physical naira, to which it is pegged at parity.

With the release of eNaira in October 2021, Nigeria became the first country in the African continent and second in the world after the Bahamas to launch a CBDC. Major motivations behind launching CBDC in Nigeria included encouraging financial inclusion, improving cross-border transactions, complementing the current payment systems, and enabling diaspora remittances. However, the adoption of eNaira has been low, with only 0.5% of the Nigerian population using CBDC within a year of its launch.

In a rather desperate move to compel its people to adopt eNaira, the government caused cash shortages in the country. This resulted in protests, riots, and unrest among Nigerians. As a result of the currency shortages in early 2022, Nigeria witnessed a 12-fold increase in the number of e-Naira wallets to 13 million since October 2021.

As of July 2023, the value of transactions had also seen a 63% rise to N22 billion (US$48 million) since its launch in October 2021. According to the International Monetary Fund (IMF), 98.5% of the eNaira wallets were inactive one year after the launch of the CBDC, meaning 98.5% of eNaira wallets have not been used even once during any given week. These low levels of activity mirror the low public adoption of eNaira.

eNaira Is It Here to Stay or Are Nigerians Going to Say ‘Nay’ by EOS Intelligence

eNaira Is It Here to Stay or Are Nigerians Going to Say ‘Nay’ by EOS Intelligence

Motivations to launch eNaira: Strong enough to sustain adoption?

CBN conceived multiple advantages of adopting eNaira, such as fostering financial inclusion, facilitating remittances, and minimizing informality in the economy. These serve as motivations for launching eNaira and are expected to take shape with the eNaira becoming more widespread along with strong support of the regulatory system.

Fostering financial inclusion

Currently, eNaira can be used by people with bank accounts, but the idea is to expand the coverage to anyone with a mobile phone, even if they do not have a bank account. Around 38% of the adult population in Nigeria do not have bank accounts. If this section of the adult population could be provided with access to eNaira through mobile phones, Nigeria could potentially achieve 90% financial inclusion.

Facilitating remittances

Nigeria is one of the Sub-Saharan African countries that receives considerable remittances. In 2019, Nigeria received US$24 billion in remittances, which are usually made through international money transfer operators. These operators charge around 1-5% of the value of the transaction as their fee. One of the motivations for launching eNaira is to reduce the costs associated with remittance transfers.

Minimizing informality in the economy

With more than half of the economy being informal, it becomes imperative for the Nigerian government to introduce a digital currency across the country to reduce the informality in the economy and increase the country’s tax revenues. Therefore, eNaira was launched in Nigeria to strengthen the tax base along with obtaining higher transparency in informal payments.

Can Nigeria overcome implementation challenges to spur eNaira adoption?

It comes as no surprise that Nigeria is facing a range of adoption barriers on its journey to eNaira’s widespread implementation. Apart from perceptual barriers such as considering eNaira wallets as deposits at the central bank, which might decrease the demand for deposits in commercial banks, there are cybersecurity risks and operational barriers linked to eNaira. These adoption barriers to Nigeria’s CBDC include a combination of factors such as lack of required tech infrastructure, lack of training of bank personnel managing the process, trust issues, and electricity and internet issues.

Lack of tech infrastructure

The CBN is looking to revamp the technological platform used for eNaira and was in talks for that with a company called R3 in early 2023. CBN is contemplating having complete control over the platform, while eNaira was initially developed in collaboration with a fintech multinational called Bitt. The change of technology platform vendor in less than two years might suggest a lack of vision of CBN regarding the technological infrastructure necessary for the seamless adoption of eNaira.

Lack of training

The CBN is expected to oversee the ledger and manage the system, while other financial institutions, such as banks, are to provide users with access to CBDC wallets. The bank staff is required to onboard users to the eNaira platform. However, it is observed that the bank staff is not sufficiently trained to be able to seamlessly bring users on board. This, in turn, negatively impacts the adoption of CBDC.

Trust issues

Nigeria has been considered a country with high money laundering and terrorist organizations funding risk (ML/TF). In February 2023, the Financial Action Task Force (FATF), a global money laundering and terrorism funding inspection organization, put Nigeria on its grey list owing to Nigeria not having adequate measures to curb such activities. Similarly, Basel Institute of Governance, a non-profit organization focused on improving governance and preventing corruption and other financial crimes, in its 2022 global ranking on ML/TF risks, placed Nigeria 17th out of 128 countries, a high spot indicating a significant risk of ML/TF.

In the current design of CBDC in Nigeria, the CBN is equipped to monitor all users’ transactions using eNaira, potentially allowing it to detect and curb ML/TF activities and improve Nigeria’s standing in the risk rankings. However, this has turned out to be a double-edged sword in implementing eNaira. The high level of supervision of all transactions has brought apprehension amongst potential users in Nigeria, most of whom believe that eNaira was developed by the government to monitor the monetary transactions, breaching their right to privacy and potentially giving the government a tool to control them. This lack of trust significantly hampers the adoption of the CBDC in Nigeria.

Electricity and internet issues

With around 92 million people not having access to power in a population of 200 million, Nigeria has one of the lowest electricity access rates globally, as per the Energy Progress Report 2022 published by Tracking SDG 7. At the same time, the internet penetration in Nigeria stands at 55.4% in 2023. Seamless internet connectivity and power access are some of the critical prerequisites for the smooth implementation of the eNaira in Nigeria.

What would give eNaira adoption a much-needed push?

As the challenges to widespread adoption of the eNaira are multipronged, finding solutions to overcome the implementation challenges is not easy or quick.

One of the main infrastructural challenges, inadequate power and internet access, should be among the first to be addressed. One way to approach it is to create offline access to the eNaira platform. To achieve this, the CBN launched the Unstructured Supplementary Service Data (USSD) code for eNaira, meaning that Nigerians without internet-enabled phones can perform transactions with eNaira.

To facilitate rapid and seamless adoption of the eNaira, the CBN must make the CBDC available to everyone with a mobile phone. More and more people should be encouraged to use eNaira by incentivizing them through rebates while paying income tax. Another incentive example dates back to October 2022 when CBN offered discounts if people used eNaira to pay for cabs.

EOS Perspective

The eNaira has the potential to have a significant impact on the Nigerian economy. As transactions using eNaira are fully traceable, more widespread adoption of eNaira is expected to expand the country’s tax base by bringing higher transparency in payments, especially in informal markets. It will undoubtedly result in higher tax revenue, a development welcomed by the government.

With US$24 billion in remittance receipts in 2019, Nigeria is considered one of the key remittance destinations in Sub-Saharan Africa. As remittances are currently burdened with a 1-5% charge of the transaction value, removing these costs through the adoption of eNaira would bring more remittance income to the population and, indirectly, more capital to the Nigerian economy.

With the expanded tax base, cheaper and higher inflows of remittances, facilitated retail payments, welfare transfers, etc., the impact of the eNaira on the Nigerian economy is likely to be quite considerable. Indeed, at the time of launch, the CBN estimated that the eNaira should increase Nigeria’s GDP by US$29 billion over the first 10 years, contributing to the country’s economic growth and development. With the implementation challenges encountered so far, it is clear that these estimations were overly optimistic. Still, how well the CBN can do its homework and undertake well-directed steps to navigate the challenges remains to be seen.

by EOS Intelligence EOS Intelligence No Comments

Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture

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In the first part of our series on agritech in Africa, we took a look into how IT and other technology investments are helping small farmers in Africa. In the second part, we are exploring the impact that potential application of advanced technologies such as blockchain can have on the African agriculture sector.

Blockchain, or distributed ledger technology, is already finding utility across several business sectors including financial, banking, retail, automotive, and aviation industries (click here to read our previous Perspectives on blockchain technology). The technology is finding its way in agriculture too, and has the potential to revolutionize the way farming is done.

This article is the second part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part one here: Agritech in Africa: Cultivating Opportunities for ICT in Agriculture

State of blockchain implementation in agriculture in Africa

Agricultural sector in Africa has already witnessed the onset of blockchain based solutions being introduced in the market. Existing tech players and emerging start-ups have developed blockchain solutions, such as eMarketplaces, agricultural credit/financing platforms, and crop insurance services. Companies, globally as well as within Africa, are harnessing applications of blockchain to develop innovative solutions targeted at key stakeholders across the food value chain.

Blockchain to promote transparency across agriculture sector

The most common application of blockchain in any industry sector (and not only agriculture) is creating an immutable record of transactions or events, which is particularly helpful in creating a trusted record of land ownership for farmers, who are traditionally dependent on senior village officials to prove their ownership of land.

Since 2017, a Kenyan start-up, Land LayBy has been using an Ethereum-based shared ledger to keep records of land transactions. This offers farmers a trusted and transparent medium to establish land ownership, which can then further be used to obtain credit from banks or alternative financing companies. BanQu and BitLand are other examples of blockchain being used as a proof of land ownership.

This feature of blockchain also enables creation of a transparent environment where companies can trace the production and journey of agricultural products across their supply chain. Transparency across the supply chain helps create trust between farmers and buyers, and the improved visibility of prices further down the value chain also enables farmers to get better value for their produce.

In 2017, US-based Bext360 started a pilot project with US-based Coda Coffee and its Uganda-based coffee export partner, ​​Great​ ​Lakes​ ​Coffee. The company developed a machine to grade and weigh coffee beans deposited to Great Lakes by individual farmers in East Uganda. The device uploads the data on a blockchain-based SaaS solution, which enables users to trace the coffee from its origin to end consumer. The blockchain solution is also used to make payments to the farmers based on the grade of their produce in form of tokens.

In 2017, Amsterdam-based Moyee Coffee also partnered with KrypC, a global blockchain, to create a fully blockchain-traceable coffee. The coffee beans are sourced from individual farmers in Ethiopia, and then roasted within the country, before being exported to the Netherlands.

This transparency can help food companies to isolate the cause of any disease outbreak impacting the food value chain. This also allows consumers can be aware of the source of the ingredients used in their food products.

Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture by EOS Intelligence

Blockchain-based platforms to improve farmer and buyer collaboration

Blockchain can also act as a platform to connect farmers with vendors, food processing, and packaging companies, providing a secure and trusted environment to both buyers and suppliers to transact without the need of a middleman. This also results in elimination of margins that need to be paid to these intermediaries, and helps improve the margins for buyers.

Farmshine, a Kenyan start-up, created a blockchain-based platform to auger trade collaboration among farmers, buyers, and service providers in Kenya. In January 2020, the company also raised USD$250,000 from Gray Matters Capital, to finance its planned future expansion to Malawi.

These blockchain platforms can also be used to connect farmers to other farmers, for activities such as asset or land sharing, resulting in more efficiency in economical farming operations. Blockchain platform can also enable small farmers to lease idle farms from their peers, thereby providing them with access to additional revenue sources, which they would not be able to do traditionally.

AgUnity, an Australian-start-up established in 2016, developed a mobile application which enables farmers to record their produce and transactions over a distributed ledger, offering a trusted and transparent platform to work with co-operatives and third-party buyers. The platform also enables farmers to share farming equipment as per a set schedule to improve overall operational and cost efficiency. In Africa, AgUnity has launched pilot projects in Kenya and Ethiopia, targeted at helping farmers achieve better income for their produce.

A Nigerian start-up, Hello Tractor uses IBM’s blockchain technology to help small farmers in Nigeria, which cannot afford tractors on their own, to lease idle tractors from owners and contractors at affordable prices through a mobile application.

Smart contracts to transform agriculture finance and insurance

Less than 3% of small farmers in sub-Saharan Africa have adequate access to agricultural insurance coverage, which leaves them vulnerable to adverse climatic situations such as droughts.

Smart contracts based on blockchain can also be used to provide crop-insurance, which can be triggered given certain set conditions are met, enabling farmers to secure their farms and family livelihood in case of extreme climatic events such as floods or droughts.

SmartCrop, an Android-based mobile platform, provides affordable crop insurance to more than 20,000 small farms in Ghana, Kenya, and Uganda through blockchain-based smart contracts, which are triggered based on intelligent weather predictions.

Netherlands-based ICS, parent company of Agrics East Africa (which provides farm inputs on credit to small farmers in Kenya and Tanzania) is also exploring a blockchain-wallet based saving product, “drought coins”, which can be encashed by farmers depending on the weather conditions and forecasts.

Tracking of assets (such as land registries) and transactions on the blockchain can also be used to verify the farmers’ history, which can be used by alternative financing companies to offer loans or credits to farmers – e.g. in cases when farmers are not able to get such financing from traditional banks – transforming the banking and financial services available to farmers.

Several African start-ups such as Twiga Foods and Cellulant have tried to explore the use of blockchain technology to offer agriculture financing solutions to small farmers in Africa.

In late 2018, Africa’s leading mobile wallet company, Cellulant, launched Agrikore, a blockchain-based digital-payment, contracting, and marketplace system that connects small farmers with large commercial customers. The company started its operations in Nigeria and is exploring expansion of its business to Kenya.

In 2018, Kenya-based Twiga Foods (that connects farmers to urban retailers in an informal market) partnered with IBM to launch a blockchain-based lending platform which offered loans to small retailers in Kenya to purchase food products from suppliers listed on Twiga platform.

Read our previous Perspective Africa’s Fintech Market Striding into New Product Segments to find out more about innovative fintech products for agriculture and other sectors financing in Africa

And last, but not the least, blockchain or cryptocurrencies can simply be used as a mode of payment with a much lower transaction fee offered by traditional banking institutions.

Improving mobile internet access to boost blockchain implementation

While blockchain has shown potential to transform agriculture in Africa, its implementation is limited by the lack of mobile/internet access and technical know-how among small farmers. As of 2018, mobile internet had penetrated only 23% of the total population in Sub-Saharan Africa.

However, the GSM Association predicts mobile internet penetration to improve significantly over the next five years, to ~39% by 2025. Improved access to internet services is expected to boost the farmers’ ability to interact with the blockchain solutions, thereby increasing development and deployment of more blockchain-based solutions for farmers.

EOS Perspective

Agritech offers an immense opportunity in Africa, and blockchain is likely to be an integral part of this opportunity. Blockchain has already started witnessing implementation in systems providing proof of ownership, platforms for farmer cooperation, and agricultural financing tools.

Unlike Asian and Latin American countries, African markets have shown a relatively positive attitude towards adoption of blockchain, a fact that promises positive environment for development of such solutions.

At the moment, most development in blockchain agritech space is concentrated in Kenya, Nigeria, Uganda, and Ghana. However, there is potential to scale up operations in other countries across Africa as well, and some start-ups have already proved this (e.g. Farmshine was able to secure the necessary financing to expand its presence in Malawi). Other companies can follow suit, however, that would only be possible with the help of further private sector investments.

Still in the nascent stages of development, blockchain solutions face an uncertain future, at least in the short term, and are dependent on external influences to pick up growth they need to impact the agriculture sector significantly. However, once such solutions achieve certain scalability, and become increasingly integrated with other technologies, such as Internet of Things and artificial intelligence, blockchain has the capability of completely transform the way farming is done in Africa.

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Agritech in Africa: Cultivating Opportunities for ICT in Agriculture

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Agriculture technologies in Africa have been undergoing significant development over the years, with many tech start-ups innovating information and communications technologies to support agriculture at all levels. While some technologies have been successfully launched, some are in initial stages of becoming a success. Private sector investments have been the key driving factor supporting the development of agriculture technologies in Africa. In the first part of our series on agritech in Africa, we are examine what impact and opportunities arise from the use of these technologies in Africa.

Agriculture plays a significant role in Africa’s economy, contributing 32% to the continent’s GDP and employing 65% of the total work force (as per the World Bank estimates). Nearly 70% of the continent’s population directly depends on agribusiness. Vast majority of farmers work on small scale farms that produce nearly 90% of all agricultural output.

This article is the first part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part two here: Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture

Agriculture in Africa has been under the pressure of many challenges such as low productivity, lack of knowledge and exposure to new farming techniques, and lack of access to financial support, especially for the small-scale farmers. These challenges are prompting investments in newer technologies to enhance the productivity through smart agriculture techniques.

Lately, there have been an increased use of various technologies in agriculture in Africa, such as Internet of Things (IoT), Open Source Software, Cloud Computing, Artificial Intelligence, Drones/Unmanned Aerial Vehicles (UAVs), and Big Data Analytics. Many tech start-ups have developed solutions targeting various aspects of agriculture, including finance, supply chain, retailing, and even delivering information related to crops and weeds. These solutions are accessible to farmers through front-end devices such as smart phones and tablets, or even SMS.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Start-ups lead agritech development in Africa

Many agritech start-ups in Africa have come up with solutions that have led to a rise in productivity of the farms. Drones have been a breakthrough technology, helping farmers oversee their crops, and manage their farms effectively. Drones use highly focused cameras to capture picture of crops, soil or weeds. This, coupled with big data analytics and Artificial Intelligence (AI), provides insights to farmers, saving their time and effort, while also helping them find potential issues which could impact the productivity of their farms.

There are various agritech start-ups that are developing such drones, and providing them to farmers for rent or lease to analyse their crops and farms. A South African agritech start-up, Aerobotics, offers an end-to-end solution to help farmers manage their farms using drones, through early detection of any crop-related problems, and offering curative measures for the problems using an AI-based analytics platform. The company partners with drone manufacturing companies such as DJI and Micasense to deliver these solutions.

Acquahmeyer, another start-up based in Ghana, also provides drones to its farming customers to help them use a comprehensive approach to apply crop pest control and plant nutrition management for their farms.

Advent of advanced technologies such as IoT is also helping farmers to adopt smart farm management through the use of smart sensors connected in a network. This helps every farmer to get granular details of the crops, soil, farming equipment, or livestock, enabling the farmers to devise appropriate farming approaches.

Kenya-based UjuziKilimo provides solution for analyzing soil characteristics using electronic sensor placed in the ground. This helps farmers with useful real-time insights into soil conditions. The solution further utilizes big data analytics to guide the farmers, by offering insights through SMS on their connected mobile phones or tablets.

Hello Tractor, a Kenyan start-up, provides an IoT solution, through which farmers can have access to affordable tractors which are monitored virtually through a remote asset tracking device on the tractor, sharing data over the Hello Tractor Cloud. Farmers, booking agents, dealers, and tractor owners are connected via IoT. The company is also collaborating with IBM to incorporate artificial intelligence and blockchain to their solutions.

AI has also witnessed a rapid growth in adoption across agriculture sector in Africa. Agrix Tech, based in Cameroon, has developed a mobile application that requires the farmers to capture the picture of diseased crop, which is then analyzed via AI to detect crop diseases, and helps the farmers with treatment solution to save their crops.

AI is also helping Kenyan farmers with the knowledge on planting the right crops at the right time. Tech giant, Capgemini, has teamed up with a Kenyan social enterprise in Kakamega region in Western Kenya to use artificial intelligence to analyze farming data, and then send insights about right time and technique of planting crops to the farmers’ cell phones.

There are other agritech solutions that include mobile applications which use digital platforms such as cloud computing to reach out to farmers, and provide them with apt agriculture solutions. Ghana-based CowTribe offers a mobile USSD-based subscription service which enables livestock farmers to connect with veterinarians for animal vaccines and other livestock healthcare services using cloud-based logistics management system. The company focuses on managing the schedules, and delivering the right service to the livestock farmers, to help them safeguard their animals from any health-related problems.

Several agritech investments are also impacting the financial side of agriculture. Kenya-based Apollo Agriculture provides solutions related to financing, farm inputs, advice insurance and market access through the use of agronomic machine learning, remote sensing, and mobile technology using satellite data and cloud computing.

Another Nigerian start-up Farmcrowdy has developed Nigeria’s first digital agriculture platform that provides financial support to the farmers by allowing those outside the agriculture industry to sponsor individual farms.

Several other agritech start-ups across the continent, such as Ghana-based Farmerline and AgroCenta, and Nigeria-based Kitovu have also launched data-driven mobile application for farmers. These technology solutions are proving to be a boon for agriculture sector in Africa, helping improve the overall efficiency and productivity.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Agritech development is concentrated in Kenya and Nigeria

But, when it comes to first adopting the newest technologies and starting an agritech business in agriculture, Kenya and Nigeria have been leading in the adoption of new agritech solutions, accounting for a significant share of agritech start-up across Africa. Kenya has played a pioneering role in bringing agritech in Africa since 2010-2011, when the first wave of agritech start-ups began to bring new niche innovations. Currently, Kenya accounts for 25% of all the agritech start-ups in Africa, and the development is progressing rapidly, thanks to the country’s advancement in technology, high smartphone penetration, and relatively widespread internet access.

Similarly, Nigeria too has sailed the boat of success in agritech start-ups since 2015, and now it accounts for 23.2% of total agritech start-ups in Africa, with include major players such as Twiga Foods, Apollo Agriculture, Agrikore, and Tulaa. The growing inclination amongst Nigerian farmers towards using digital tools in agriculture sector has further pushed the rapid development in agritech sector in the country.

Other countries have also shown potential for agritech development, though it is still in the initial stages of becoming mainstream in their agriculture sectors. Ghana has encouraged several start-ups to launch different technology innovations for making agriculture more sustainable, while South Africa, Uganda, and Zimbabwe have also witnessed the rise in agritech start-ups over the years with newer technologies for agriculture sector.

Recent investments highlight the agritech potential

The agriculture technologies in Africa got the boost from the increased private funding. According to a report by Disrupt-Africa released in 2018, there has been a total investment of US$19 million in agritech sector since 2016. These investments have largely focused on funding agritech start-ups working on bringing innovative agriculture technologies. Also, according to the same report, the number of agritech start-ups rose by 110% from 2016 to 2018.

Some of the recent investments in the agritech sector include Kenya’s Twiga Foods, a B2B food distribution company, which raised US$30 million from investors led by Goldman Sachs in October 2019. The company aims to set-up a distribution centre in Nairobi to offer better supply chain services, while also expanding to more cities in Kenya, including Mombasa.

In December 2019, Kenya-based agritech start-up Farmshine, also raised US$25 million in funding from US-based Gray Matter’s Capital coLabs (GMC coLabs), to expand its operations in Malawi. GMC coLabs also invested US$1 million in another Kenyan B2B agritech start-up Taimba in July 2019. Taimba provides a mobile-based cashless platform connecting smallholder farmers to urban retailers. The investment was focused on strengthening Taimba’s infrastructure and increase the delivery logistics to cater to new markets.

Cellulant, a leading pan-African digital payments service provider that offers a real-time payment platform to farmers, also raised US$47.5 million from a consortium of investors in May 2018, which is the largest investment in the African tech industry till date. Cellulant also plans to channel a significant portion of funds into its Agrikore subsidiary, an agritech start-up dealing with blockchain based smart-contracting, payments, and marketplace system.

EOS Perspective

African agritech is expected to witness high growth in future. According to a CTA report on Digitalization for Agriculture (D4Ag) published in 2018, digital agriculture solutions are likely to reach 60-100 million smallholder famers, while generating annual revenues of nearly US$320- US$470 million by the end of 2020.

Adoption and use of innovative technologies such as remote sensing, diagnostics, IoT sensors for digitalization of agriculture is steadily moving from experimental stage to full-scale deployment, contributing to the data revolution in agriculture, while also unlocking new business models and opportunities.

Apart from these, blockchain is gaining prominence, and finding applications in the agriculture sector in Africa. This technology has the potential to significantly impact the agriculture sector, which we will discuss in the second part of our series on Agritech in Africa.

However, lack of affordability and knowledge to access such technologies, especially by small-scale farmers, has restricted the growth and reachability of these solutions. With the need to educate farmers and make such technology affordable and viable, it is likely that it may take at least 5-7 years before these technologies become truly mainstream in the continent.

A disparity of investments has been observed among the countries in the region. Over the years, countries such as Kenya, Nigeria, and Ghana have experienced a strong growth in terms of private investments, while other countries are left wanting. Investors have prioritized easy-to-reach markets in Africa, leaving behind the lower-income markets, resulting in agritech becoming less sustainable and scalable in these markets. However, several other African countries have shown the appetite to adopt agritech solutions, and offer significant potential.

This requires an intervention and participation from both governments and private investors, which can help improve scalability of agriculture technologies in the region. Implementation of farming digital literacy, public-private partnerships, and increased private sector investments in agritech enterprises can help the agritech industry experience a consistent and higher success rate, thus bringing the agriculture technology to a mainstream at faster pace.

Blockchain a Frontline Warrior in Battling Coronavirus Pandemic by EOS Intelligence
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Blockchain: a Frontline Warrior in Battling COVID-19 Pandemic

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SARS-COV-2 has brought the world to a standstill. Technology and its creative uses have been playing a pivotal role in sustaining lives during the pandemic as well as combating the crisis. One such technology that has been at the forefront of the pandemic is blockchain. From mitigating supply chain issues with medicines and protection gear to facilitating transparency in donations to effectively tracking the spread of the virus and protecting patient privacy, blockchain technology is being applied across the spectrum to contain and manage the outbreak.

The current pandemic has brought to light many inefficiencies and limitations of the existing global healthcare systems, wherein governments across the globe are grappling to control the outbreak, challenged by the lack of a unified, interconnected, and trusted network to share data and track cases. Blockchain has several inherent properties, such as decentralized ledger, transparency, and immutability, that make it suitable for handling and managing various aspects of containing the pandemic.

Outbreak tracking

Global health authorities and governments across the globe are having a hard time gathering authentic data regarding tests and patient numbers, hospital beds, recoveries, etc. Currently, most of the data circulating is disparate and comes from multiple sources, such as hospitals, labs, the public, and media, instead of one authorized source. This is extremely damaging since it results in the creation of a great amount of inaccurate and duplicate data, which, if trusted, makes the process of tracking and containment both time-consuming and ineffective. This is counter-productive to the management of a disease that is as fast-spreading as COVID-19.

Blockchain technology can come into play in effectively tackling this issue. Owing to its distributed and immutable nature, blockchain can provide a feasible solution for tracking the outbreak. Blockchain-based apps facilitate organizations across the globe to form a single connected network where data can be shared in real time and securely. Moreover, since data stored in the blockchain is immutable, it is protected against unauthorized changes, and its distributed nature ensures protection against fraudulent data (since each entry requires consensus algorithms and smart contracts). Lastly, blockchain efficiently manages high volumes of data (as in the cases of the COVID-19 pandemic) on a real-time basis, which cannot be managed using human resources.

However, in addition to these factors, the aspect that stands out the most and makes the blockchain technology ideal for monitoring and managing outbreak-related information is the level of privacy it offers. People do not wish for their information to be shared publicly or be used for other purposes. Thus, it is a challenge to get patients to collaborate with governments and healthcare institutions to share information regarding their condition and wellness. For instance, the Israeli government recently permitted healthcare institutions to track citizens’ mobile phones to control the spread of coronavirus. This has raised concerns from human rights organizations as citizens are not comfortable with sharing their personal information.

Since blockchain uses a distributed ledger, which ensures accountability and transparency with regard to access to its stored data, the information shared through blockchain cannot be extracted or misused. Moreover, information stored in a blockchain cannot be hacked. This encourages patients to share information regarding their condition, symptoms, location, and underlying health conditions without fear of the information being misused or shared with any third party.

Furthermore, information shared by patients in a blockchain network may not only be used for tracking the outbreak but also facilitate health centers’ study of the disease characteristics and patterns to develop treatment and solutions.

For instance, WHO has been using a blockchain-based data streaming platform, called MiPasa, which facilitates the sharing of information amongst need-to-know organizations such as state authorities and health officials. The platform is built on top of Hyperledger Fabric and partners with IBM for blockchain and cloud platforms. The application cross-references siloed location data with health information to track and prevent the spread of the outbreak, all while protecting patient privacy.

In another example, an Atlanta-based developer of blockchain-enabled healthcare applications, Acoer, developed an application called HashLog, which allows real-time logging and data visualization of the spread of the infection. HashLog provides real-time updates on the spread of the disease by tracking the movement of infected people to identify potential outbreaks and prevent further spread. The application uses the Hedera Hashgraph distributed ledger technology, and each entry is recorded through a verified hash reference on the ledger, ensuring that the data is correct.

Donations

In addition to tracking and preventing outbreaks, blockchain also plays an important role in securing donations. From hospitals and state authorities with insufficient funds for medical supplies to economically weaker sections of the population losing sources of income due to lockdown, the current pandemic has displaced a huge number of people across the globe. Thus, in such times, donations play a critical role in sustaining livelihoods and providing healthcare supplies to the affected people. However, given the fraud associated with donations in recent times, lack of trust is a common factor affecting the success of donations. Several individuals want to help and donate, however, are discouraged due to fear of their money being misused.

For instance in India, the government and police warned citizens against several fake relief schemes that have been floating in the name of COVID-19 relief, some even mirroring the Prime Ministers Relief Fund. These kinds of activities deter willing people from donating.

Blockchain technology can be used to effectively combat this issue. Since all transactions in the blockchain are secure, transparent, and traceable, donors can track their funds and see where they are utilized. This gives confidence to donors that their funds are being used for the exact purpose that they intended.

One such example is Hangzhou-based blockchain startup Hyperchain, which built a blockchain-based donation tracking platform for supporting government and hospitals (such as Tangshan People’s Hospital, Jiayu People’s Hospital, and Xiantao No. 1 People’s Hospital) in the donation process. The platform has attracted more than US$2 million in donations.

 

Blockchain a Frontline Warrior in Battling Coronavirus Pandemic by EOS Intelligence

Supply chain tracking

Blockchain technology has been deemed extremely useful in managing and tracing the supply chain in several sectors as retail (for more insights on this, read our article Blockchain Paving Its Way into Retail Industry). However, given the current pandemic, the technology can also utilize similar functionalities and play a significant role in tracking of medical supplies.

Given the pace of the spread of COVID-19, authorities and healthcare organizations across the globe have faced a shortage of medical supplies, such as masks, sanitizers, PPE kits, ventilators, testing equipment, as well as some medicines. This drastic increase in demand has resulted in the distribution of a large number of counterfeit and faulty products. Blockchain technology can play a significant role to combat this. Given the data provenance in blockchain and its immutable nature, it is possible to identify and trace back every touchpoint of the medical supplies to ensure its authenticity.

In addition to filtering counterfeit products, blockchain also helps streamline the supply chain process to ensure hospitals and doctors secure timely supplies to treat patients. Blockchain can provide real-time updates regarding demand so that medical manufacturers can adjust production levels accordingly. In addition, it can help fast-track supply chain contracts through the use of smart contracts and facilitate faster payments, thereby improving overall efficiency.

In February 2020, China-based AliPay, along with the Zhejiang Provincial Health Commission and the Economy and Information Technology Department, launched a blockchain-based platform to facilitate the tracking of medical supplies required for fighting SARS-COV-2. The platform has improved trust within the medical supply chain since it records and tracks the entire provenance of preventive supplies, including masks, gloves, and PPE kits.

Apart from the medical supply chain, blockchain can also help limit supply chain disruptions faced by several other industries due to lockdowns in several parts of the world. However, companies that are using blockchain for managing their supply chain have an advantage as they have better visibility into their complete supply chain and thereby can identify points of disruption in a timely manner.

Avoiding future pandemics

Blockchain is on the front line for fighting the current pandemic, but it also has the potential to prevent future disease outbreaks. Most of the current healthcare surveillance systems across the globe are outdated and lack the required timeliness and efficiency in sharing information with local as well as international health enforcement organizations. Moreover, sometimes there is a question of deliberate delay in the sharing of critical information.

To this effect, blockchain-based health surveillance systems can help mitigate future outbreaks. Since they operate on a decentralized ledger, the surveillance data is transparently available to health organizations across the globe in a real-time manner, without the fear of any political disruptions. Timely knowledge of a potential outbreak is the first and most critical step in preventing a similar situation in the future.

In addition to the above-mentioned applications, blockchain companies, along with institutions, are developing creative solutions that help reduce challenges faced by people due to COVID-19 in their day-to-day lives. For instance, Toronto-based blockchain company Emerge launched a public safety app called Civitas, which assists citizens and local authorities across Latin America. This app matches one’s official ID to confidential medical records stored in the blockchain to identify whether the person is allowed to leave the house or not. Thus, the app allows police to verify if the person has travel permission just on the basis of their government ID and without gaining access to the person’s medical records. The app also determines the safest time and day for going out for essentials for people who are experiencing COVID-like symptoms.

Moreover, as discussed in our previous article (Blockchain Scores Well in the Education Sector), blockchain is also extremely useful in the virtual education scenario, which is now the new way of schooling for a large part of students across the globe.

EOS Perspective

Blockchain technology has several inherent properties that make it ideal for helping to manage and combat the current pandemic. Its decentralized, traceable, and immutable properties make it especially desirable for managing contact tracing and outbreak tracking, which are critical in handling a pandemic efficiently. Moreover, the benefits of blockchain are further amplified when used alongside other technologies, such as artificial intelligence, cloud computing, and big data.

However, despite its several uses, the issue of scalability plagues blockchain adaption at a larger scale. Blockchain is still a nascent technology and lacks high-level scalability. With COVID-19 affecting most of the world, the current blockchain companies do not have the level of scalability to provide all-encompassing global-level solutions.

Furthermore, blockchain technology does not operate alone, and it needs to be configured with the operating legacy system of companies and other stakeholders. However, most legacy systems are relatively old and, therefore, do not support blockchain technology. Updating or reconfiguring a legacy system is a tedious process (both in terms of time and money), and companies may not want to tie up resources for that at the current time.

Given these drawbacks, blockchain may not be deployed at a global-scale level during this pandemic, however, its inherent benefits have made companies, authorities, and global health organizations ponder, explore, and evaluate its potential in managing such situations in the future. While the COVID-19 pandemic has caught the world largely unprepared, organizations and companies across the globe are gearing up to ensure this history is not repeated, and blockchain technology has emerged as a critical part of the solution.

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Blockchain Scores Well in the Education Sector

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Blockchain has now been widely accepted as a technology offering superior capabilities when it comes to data security, transparency, and immutability. This has made it extremely relevant in industries, such as finance and healthcare, where security is critical. However, after getting a foothold in such industries, the technology is extending its reach beyond current uses into other sectors. One such industry is education, where blockchain can facilitate a safe, secure, and auditable ledger covering all education-based data and transactions. However, since blockchain is still new and relatively unexplored in this space, its wide applicability and commercial acceptability is yet to be proven.

Blockchain is fast finding its ground across several industries and education industry seems to be no exception. While still behind in terms of implementation, especially when compared with other sectors such as finance and healthcare, education sector is exploring various blockchain-based applications that can improve data security, facilitate degree verification, and prevent plagiarism, among other things.

Read our other articles on blockchain where we talk about the technology gaining prominence in several industries, including healthcare, retail, banking, car rental, and aviation.

Data breach/security

Industries such as finance and health have been using blockchain to protect their customers’ data. Blockchain can find similar application in the education sector, which is also highly susceptible to data breaches. As per Gamalto, a Netherlands-based international digital security firm, in 2017, the education sector was third (after finance and healthcare industry) with regards to the highest number of experienced data breaches, accounting for 13% of all data breaches across industries.

The use of blockchain to protect student information and records can help mitigate the issue of data breaches. With schools and universities storing data digitally on blockchain, they would be able to store and share student data without making it accessible to hackers. Moreover, data stored on blockchain would help improve transparency and accuracy, reduce human errors and paper-based processes, and eliminate fraudulence.

With schools and universities storing data digitally on blockchain, they would be able to store and share student data without making it accessible to hackers.

Data being stored on blockchain also helps employers be assured that the candidate or student seeking employment has authentic degrees and qualifications.

In February 2019, the Maltese government signed a contract with blockchain startup, Learning Machine, to store all educational records and certificates in the country on a blockchain. The project is a two-year pilot project and aims at ensuring that all educational certificates, including university and secondary school certificates (encompassing state, church, and independent schools), are issued and stored on blockchain. The project is expected to minimize bureaucracy and provide greater security for students’ private data.

Data access and verification

Currently, most institutions store student data within their own systems and the student needs to approach the university to obtain the certification. Alternatively, prospective employers need to verify the authenticity of a candidate’s certificates from the respective university/institution. In cases where a student has multiple degrees and certification, this process becomes cumbersome and susceptible to errors.

Blockchain-based diplomas can offer an easy solution to this issue. With certifications being stored on a blockchain, students can obtain fast and easy access to their records and can share them with potential employers without the latter being concerned about their authenticity.

With certifications being stored on a blockchain, students can obtain fast and easy access to their records and can share them with potential employers without the latter being concerned about their authenticity.

Moreover, in case a university closes down or the credential records are destroyed due to extraordinary circumstances (fire, earthquake, war, etc.), student’s certifications still hold merit and would be verifiable based on blockchain records.

In 2017, MIT introduced a pilot program under which it offered digital diplomas to 111 graduates in addition to the traditional diplomas. These graduates were given an option to receive their diplomas on their smartphones via an app, called the Blockcerts Wallets. The pilot project, which was a partnership between MIT and Massachusetts-based software firm, Learning Machine, enabled students to quickly and easily share a verifiable and tamper-proof version of their diploma with prospective employers, other schools, as well as friends and family.

Apart from MIT, several other institutions offer digital credentials through blockchain. For instance, Open University’s Knowledge Media Institute (KMI) was awarded about US$550,000 (GBP 450,000) in 2018, to develop and employ blockchain technology to allow learners to manage and verify their educational and employment records.

Copyright and plagiarism

Plagiarism is a big issue in the academic world, with people having easy access to other people’s research or educational resources for free over the Internet. However, the use of blockchain can effectively address this problem. One of blockchain’s key characteristic is that information can be securely stored without being tampered with. Thus, academic materials stored in a blockchain-based platform can be accessed by public but cannot be altered or plagiarized. Moreover, any contention regarding originality of information can be tracked and protected with a time stamp.

One of blockchain’s key characteristic is that information can be securely stored without being tampered with. Thus, academic materials stored in a blockchain-based platform can be accessed by public but cannot be altered or plagiarized. Moreover, any contention regarding originality of information can be tracked and protected with a time stamp.

This also helps publishers keep track of reuse of their material and be rewarded based on actual use and reuse of their papers (similar to how they are rewarded for citations of their research material), thereby eliminating any free-use of their materials on the Internet.

Taking things a step further, teachers or publishers could be awarded crypto-coins for the reuse of their material through smart contracts. This way publishers would not have to use intermediaries such as research journals, which charge high fees and thereby limit access to the material.

Creation of decentralized education marketplaces

Education industry still operates in a closed and centralized way with universities and education providers giving credentials for courses through their own diplomas and degrees. Even in case of digital education solutions, there is always a body providing credentials for the course undertaken. Due to this, education remains relatively expensive and not approachable by all.

However, blockchain-based platforms can help solve this problem by creating decentralized education marketplaces, where the quality of education provided is validated by students and educators participating in the course. Using blockchain, these marketplaces connect students and professors who in turn use smart contacts to undertake the course they are interested in. At the end of the course the student receives an immutable certificate of completion and the ledger records the professor who taught the course.

An example of such a company is Switzerland-based ODEM, which was founded in 2017. ODEM is a blockchain-based decentralized marketplace for educational products and services, wherein professors and students come together to teach and learn various courses. The two parties engage through smart contracts and the ODEM ledger recognizes the courses a student has taken or a professor has taught, which boosts their reputation on the ODEM platform. Moreover, ODEM creates ‘skill badges’ for professors and students who complete courses in their network. This helps the decentralized platform as more students wish to undertake courses with professors who have multiple skill badges (thereby higher proficiency in the subject), while professors are also more interested to work with students with multiple badges (i.e. have displayed interest to learn and expand their skill set in the subject).

Several other blockchain-based education marketplaces have emerged. In February 2018, a blockchain-based university, called Woolf University was founded, which allowed any accredited educator to launch and teach courses that would advance users toward a degree.

Blockchain Scores Well in the Education Sector by EOS Intelligence

Other solutions

In addition to this, blockchain increasingly finds application in other educational areas across the globe. In Kazakhstan, the government is using blockchain to manage the national school enrollment of young children to kindergarten. In Kazakhstan, all parents need to apply for their children’s enrollment in local kindergartens, which results in waiting lists for several such institutions, and these lists are managed by the state. In February 2019, the government decentralized the system and put it on a blockchain in order to optimize the waiting list and make the process more transparent.

Similarly, blockchain is also being used for test prepping and learning. Blockchain-based platforms can assist students in preparing for tests as this helps students keep track of their progress. One such example is a chatbot app by Opet Foundation, wherein students can ask questions regarding any subject, the app recommends resources for further studies based on current proficiency, and tracks learning progress through blockchain technology.

Blockchain is also being applied to improve and expand school library systems. With blockchain, schools can create and manage a distributed metadata system for libraries that would allow peer-to-peer sharing of books and other reading material. Also, it will assist in management of libraries as the technology keeps detailed logs of what books are going out and which ones are being returned in an error-free and meticulous fashion. In November 2017, the Institute of Museum and Library Services gave a US$100,000 grant to the San José State University, School of Information to explore blockchain applications in libraries encompassing building an enhanced permission-less metadata archive, supporting community-based collections, and facilitating better digital rights management.

EOS Perspective

Blockchain-based applications are gaining momentum across industries and the education sector is no exception. As in many other sectors, blockchain has the potential to revolutionize the industry, especially with regards to storing data and sharing credentials. Several start-ups have entered this space and are already challenging industry norms.

More so, blockchain-based start-ups in the education sector are becoming even more relevant as the world struggles with calamities such as bush fires or the coronavirus pandemic. As schools and universities shut down due to the ongoing pandemic, blockchain-based platforms play an important role in ensuring that education is not disrupted. Recently, blockchain-based educational platform, Odem, has offered its online integrated learning platform and certification management system free of charge to schools and educators that have shut down due to the virus scare. In the midst of the pandemic, the platform has received interest from Italy, Ireland, Germany, Cairo, and the USA, with a US-based University discussing uploading about 500 courses onto the Odem blockchain to combat class time lost due to the outbreak.

While blockchain appears to be in a strong position to reinvent the education sector, it is easier said than done. Blockchain requires alterations in industry-wide business processes, which not only require significant amount of investments but also involvement of government bodies to develop blockchain regulations as well as build the requisite infrastructure for the technology. Currently the cost of processing and storing data through blockchain is high and scalability remains an issue.

Moreover, currently most schools across the globe have their own systems to store and manage student’s information, progress, and certifications. These would require to be standardized if the use of blockchain grows and new standards would need to be developed. This is an extremely tedious and time consuming procedure and several schools may not be interested in sharing information with third parties.

That being said, blockchain is expected to penetrate the education sector in the years to come and many institutions have already started toying with the technology and its applications. However, just like in case of some other industries, it is yet to be seen if blockchain manages to revolutionize the entire industry or offer few niche applications in some areas and limited geographic scope. It will have a lot to do with the cost and ease of adaptation of the technology in already exiting school systems.

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Blockchain Likely to Make a Safe Landing in Aviation Sector

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Blockchain technology has captured the interest of several industries and aviation is no exception. Its decentralized, secure, and immutable nature makes blockchain technology ideal for many operational aspects and verticals within the aviation industry. In fact, most of the blockchain-based solutions in the aviation sector extend beyond basic financial transactions and range across security and identity management, ticketing, maintenance, baggage management, and loyalty programs. Various stakeholders in the aviation industry, including airlines, airports, aircraft manufacturers and maintenance providers, and airspace technology providers, etc., are partnering together to explore and develop blockchain-based capabilities across the industry’s value chain.

Blockchain technology is fast emerging as the revolutionary technology in the aviation industry with most airline and airport CIOs investing huge resources and effort in exploring this space. As per Air Transport IT Insights 2018 report by SITA, one of the world’s leading air transport communications and information technology company, about 60% airlines have invested in blockchain-based pilot projects or research programs for implementation by 2021. This shows an increase from 2017, when only 42% airlines invested in blockchain-based research programs. Moreover, airports are also exploring this technology, with 34% airports planning blockchain-based R&D projects by 2021.

Owing to its decentralized, scalable, transparent, and secure nature, blockchain technology’s capabilities align well with the needs of the aviation sector, especially in the fields of ticketing, maintenance, luggage tracking, loyalty programs, and identity management.

Blockchain to streamline security and identity management

Passenger identity management is one of the most sought-after uses of blockchain in aviation. As per the SITA study, about 40% airlines and 36% airports claim passenger identity management to be one of the most prominent areas of application and benefit of blockchain technology.

Blockchain technology has the ability to streamline the identity management of passengers through the combined use of blockchain, biometrics, and mobile (or wearable devices). Currently, a passenger needs to pass several checkpoints where different parties (airport staff, airlines, control authorities, etc.) verify their physical IDs. This process is cumbersome, time consuming, and also vulnerable to human errors. Moreover, it results in a great amount of duplication of data as each stakeholder stores and verifies passenger information at their own level.

Blockchain, owing to its immutable, decentralized, and secure nature, helps solve these issues by validating identities using biometrics. Blockchain with security wrappers ensures that the information stored in the system is protected and helps share it with all the stakeholders through the use of authorized access protocols. Thus, blockchain and biometric-based ID management help eliminate the need for paper documentation (such as passport and visa) across the entire journey. This will facilitate a smoother and quicker travel experience for the passenger, as compared with the current verification and multiple checkpoints. Moreover, it will reduce security lapses as the need for paper documents (that can be forged) and human intervention is low.

Blockchain start-up Sho Card, which provides digital identification cards through blockchain, has partnered with SITA to develop a digital identity card as a proof of concept, wherein the traveler obtains a single travel token for his journey.

Under this concept, the traveler undergoes an initial check at the travel counter, where he is positively identified using biometrics and issued a travel token. A photo of the traveler is also taken for verification. This information (biometric ID information, travel token, photo) is stored on the travelers mobile or wearable device and replaces the requirement of any physical/paper identification. When the traveler approaches any gate or checkpoint, he presents the travel token via a QR code on the SITA traveler app. The agent at the checkpoint scans the QR code and validates the travel token and the individual matches to that in the photo. The traveler is allowed to pass if the information matches. This significantly reduces costs and time taken at several checkpoints for document validation. Moreover it reduces the human liability around documents check.

Other blockchain players, such as UK-based ObjectTech and VChain Technology, have also entered into agreements with Dubai’s Immigration and Visa Department and International Airlines Group (AIG), respectively, to provide blockchain-based solutions to streamline passenger data management for the aviation sector.

Blockchain and biometric-based ID management help eliminate the need for paper documentation (such as passport and visa) across the entire journey. This will facilitate a smoother and quicker travel experience for the passenger, as compared with the current verification and multiple checkpoints.

Smart contracts to ease out ticketing

Airlines currently sell paper-based or electronic tickets through their centralized ticketing system. For each booking, there are multiple touchpoints, which include airlines, travel agencies (online and offline), banks and card providers, and government agencies. Upon the sale of a ticket, each party stores passenger data at their individual level, which makes the process complex and vulnerable to errors. In addition, ticketing information being currently stored in a centralized database by airlines and airports makes it vulnerable to hacks and glitches, which in turn can result in reputation and revenue loss for the airlines or airport. This was seen in case of Southwest Airlines in July 2016, when the centralized ticketing database failed, resulting in the cancellation of about 2,000 flights and a revenue loss of US$82 million.

The use of blockchain-based smart contracts helps eliminate the need for paper tickets and e-tickets can be tokenized. Tokenized tickets can have their own set of embedded business logic and terms and conditions associated with how they are sold and used including pricing and timings for the flights. Moreover, further stipulations can be added to the ticket such as the class of the ticket, lounge access, etc. The decentralized nature of blockchain insulates it from hacking and system failures and also mitigates data sharing errors. Furthermore, it allows for the sale of tickets in real-time from different partners across the globe. It also improves customer experience and cost effectiveness of service by automating time consuming tasks, streamlining payment process, and reducing settlement times.

The use of blockchain-based smart contracts helps eliminate the need for paper tickets and e-tickets can be tokenized. Tokenized tickets can have their own set of business logic and terms and conditions associated with how they are sold and used including pricing and timings for the flights.

In July 2018, Russia’s second largest airline, S7 Airlines partnered with Russian commercial Bank, Alfa Bank, to build and sell its airline tickets over an ethereum-based private blockchain platform. The use of blockchain enabled the airlines to securely connect its online booking system with the bank’s payment processing systems, thereby speeding the payment processing time (from about two weeks to less than a minute) and reducing manual paperwork. In July 2019, the airline’s blockchain-based ticketing platform witnessed sales of US$1 million, indicating the success of the venture.

Blockchain to enable luggage tracking

One of the areas where airlines are constantly working on improving customer service and reducing costs is cargo and passenger baggage management. A passenger’s baggage passes through several automated and manual processes before being handed back to them and data about the cargo/luggage’s journey is usually stored in a non-standardized form on an individual level by multiple players that handle the cargo/luggage, including airlines personnel, transportation companies, airports, and local authorities.

This process results in passenger luggage being often lost or misdirected, a fact that impacts the airlines both in terms of reputation and cost. As per SITA’s Baggage Report 2018, this translated into additional costs of about US$2.3 billion for airlines in 2017.

Blockchain, which functions as an online record-keeping system maintained on a peer-to-peer network rather than a central agency or authority, can help airlines tackle the issues of lost luggage. Using blockchain, customers (and airlines) can track the luggage throughout its transfer process, which provides full transparency to the process. Thus if a bag is misplaced, the airlines can track back the entire journey of the lost luggage to identify the point where it went missing and why.

Blockchain Likely to Make a Safe Landing in Aviation Sector by EOS Intelligence

In November 2017, Air New Zealand partnered with Swiss-based start-up Winding Tree (which is a blockchain-based distribution platform for the travel industry), to explore applications based on blockchain technology that could help the carrier improve the efficiency and security of booking and baggage tracking services. The potential applications that Air New Zealand is looking to explore include cargo and baggage tracking, retail distribution, and loyalty program opportunities.

Another use of blockchain in baggage management is in determining lost baggage compensation. Through the use of smart contracts, airlines could automate insurance claims for lost baggage and instantaneously compensate customers. Rega, a blockchain insurance platform, has been deploying blockchain to create a “crowd-insurance” platform in which the risk of lost luggage is shared across the community. This works primarily as a peer-to-peer insurance that uses smart contracts and smart tokens to insure baggage for a group of passengers without the need for any insurance companies, agents, or intermediaries. Through this method, it has managed to reduce lost baggage premium to about US$12 annually for a coverage of up to US$5,000.

Blockchain to better manage maintenance history and spare parts sourcing

Flight maintenance is one of the largest cost-heads for an airline. As per IATA, in 2017, airlines globally spent US$76 billion on MRO (maintenance, repair, and overhaul), representing about 11% of total operational costs.

Currently, the MRO process is extremely complex, with the value chain encompassing multiple players such as manufacturers, component traders, airlines, service providers, and regulatory authorities. Moreover, each of these bodies store information in separate databases or physical ledgers. This makes obtaining information about components and maintenance extremely challenging and time consuming. Moreover, it can lead to data discrepancy (as it is stored at individual levels by the various parties), which in turn questions the reliability of this data and the safety of the component. In these cases, the worthiness of the component is established through an expensive and time consuming investigation, testing, and recertification process.

Blockchain’s decentralized, immutable, and transparent nature, makes it ideal for managing MRO records for airlines. Blockchain digitally logs and stores data regarding aircraft spare parts and maintenance, from the time the part is manufactured, to when it is installed, to every time maintenance or repair occurs. This decentralized, transparent, and real-time storage of data ensures that the information is available to all authorized parties (from airlines to MRO service providers) in a prompt and accurate manner, thereby saving on time and costs while achieving better safety and maintenance standards.

Blockchain’s decentralized, immutable, and transparent nature, makes it ideal for managing MRO records for airlines. 

In addition, the use of blockchain enables airlines to engage in more predictive maintenance, by enabling technicians to review the complete configuration and history of the various components in the aircraft on a blockchain-based ledger. This helps them tackle issues in a preventive manner rather than taking action after a problem has occurred. Similarly, MRO providers can also use blockchain to offer predictive maintenance services to airlines, saving money for both themselves and the airlines.

Blockchain also helps in sourcing spare parts and removing middle men in the sourcing process. Currently, aircraft components are sourced from vendors or traders in a marketplace, who then further scout for the component with manufacturers or sometimes other traders/resellers. This process is expensive (due to multiple mark-ups) and time consuming and most of all, lacks transparency. To tackle this, various manufacturers, airlines, and MROs can create a blockchain-powered aerospace marketplace, where the buyers can share the serial number of the product needed, which in turn can be matched to the real-time ownership and location of the seller currently holding the product. This would eliminate the need for middle men in the industry and also save time and reduce costs especially in case of scarce parts.

In October 2017, Air France-KLM announced its plans to evaluate and develop a blockchain-based system to manage replacement parts on in-service airplanes and improve aircraft maintenance procedures and record keeping. Similarly, in August 2018, Russian airlines, S7, in association with Russian energy player, Gazprom Neft, announced the successful development and implementation of a blockchain-based system to refuel aircraft using smart contracts. The smart contracts will remove the need for pre-payment, bank guarantees, and will further insulate the parties from any unforeseen financial risks involved in the refueling process. This is expected to help reduce cost and also save time both for the airlines as well as their energy partner.

Blockchain to add value to airlines loyalty programs

Flyer loyalty programs, better known as frequent flyer miles, are an integral part of an airline’s customer engagement program. All airlines run a loyalty program, whether individually or as an alliance. However, in traditional loyalty programs travelers need to wait to accrue a certain amount of points to utilize them, with limitations on where and when they can use them. Loyalty programs for alliances have an even more complex structure when compared with stand-alone loyalty programs. This results in limited incentive for travelers to remain loyal to a certain airline(s), thereby defeating the purpose of frequent flyer programs.

Blockchain has the ability to streamline the frequent flyer programs, especially for alliances. By tokenizing loyalty points on the blockchain, travelers can obtain instant value for the points by redeeming them in real-time and across a great number of partnering merchants. Thus with points being accepted as a form of “currency” across a pool of merchants, travelers can use these points in a faster and more efficient manner, thereby remaining motivated to maintain loyalty with a particular airline(s).

In July 2018, Singapore Airlines was the first airline globally to launch a blockchain-based loyalty program for frequent flyers. Under this program, Singapore Airline members can convert their miles into units of payments which are stored in a digital wallet, called KrisPay. This digital wallet was developed by Singapore Airlines in partnership with KPMG and Microsoft. The airline has partnered with 18 merchants across Singapore (including eateries, gas stations, beauty parlors, etc.) where customers can use KrisPay units.

Blockchain initiatives

Considering the various applications of blockchain across the aviation sector, a great number of airlines and airspace technology providers are investing heavily to explore this space and develop blockchain-based solutions for various verticals.

In July 2018, Lufthansa airlines partnered with SAP to launch a global Aviation Blockchain Challenge in order to support blockchain R&D in the sector. Through this venture, the two companies are seeking ideas from entrepreneurs and blockchain start-ups with regards to enhancing passenger experience, improving airline operations, processes, and maintenance, and streamlining the aviation supply chain.

Similarly in July 2018, SITA, which is the air transport industry’s largest technology provider and is jointly owned by a large number of airlines, launched the Aviation Blockchain Sandbox project. Through the Sandbox project, the technology provider aims to achieve intra-industry collaboration to understand and explore the applications of blockchain in the aviation space and undertake cross-industry initiatives. This platform gives access to smart contracts known as FlightChain, which will help improve flight status data problem for airlines and airports by storing all flight information on the blockchain to provide consistent data across the network.

EOS Perspective

Blockchain technology has taken several industries by storm, and shows great potential in several others (read our previous publications: Blockchain Technology – Next Frontier in Healthcare?, Blockchain Paving Its Way into Retail Industry, and Blockchain: A Potential Disruptor in Car Rental and Leasing Industry to find out more). Aviation seems to be no exception. Although application of blockchain in the aviation industry still seems to be largely at the exploration stage (with most companies running proof of concepts and investing in testing phases), it definitely holds the potential to transform the way air travel is currently done.

Explore our other Perspectives on blockchain

That being said, blockchain cannot be seen as a universal remedy for all the issues faced by the aviation sector. To ensure that blockchain is used in the most efficient and cost effective manner, it is critical for players to have a solution-oriented approach when exploring blockchain-based applications, i.e. starting with a specific problem and working towards developing solutions, rather than making blockchain a solution and looking for problems to solve with it. With blockchain becoming the buzz word across the board, it is very common for companies to get carried away with the technology trying to fit in places, where its needs or costs are not justified. Considering that the technology is relatively new and has limited scalability at the moment, a lot of blockchain-solutions that may work well in theory may not be practical in today’s day and may need to wait for the blockchain technology to evolve further.

Moreover, for blockchain to be successfully applied across the industry, it is very important for the stakeholders to collaborate to develop blockchain solutions with regards to sharing data, technology, and costs related to R&D. This is also somewhat of a challenge as adoption of blockchain requires transparency and most companies are wary of sharing their data and information with external players.

Despite these challenges, the adoption of blockchain technology by the aviation sector seems more like a matter of “when”, rather than “if”. Most players in the aviation sector have been operating through traditional business practices for several decades now and may take time to embrace blockchain in mainstream operations. However, several players such as Lufthansa and Air France-KLM have started leading the way. With promises of cost savings and better services, it is to be seen if blockchain can enjoy a smooth landing in the aviation sector.

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