It’s not easy being mainstream financial institution. You’re regulated something fierce. Your legacy technology likely is a mishmash of different parts held together by a series of patches.
No wonder that when you see a revolutionary concept like the blockchain you don’t immediately embrace it with open arms. How will the technology link up with your existing melange? Can you be sure its compliant?
Netki provides companies and institutions with a suite of standards-based naming and digital identity solutions, cofounder and CEO Justin Newton said. That allows them to build secure blockchain-based applications and API-based online financial services that are highly interoperable, simple to use and compliant with current industry and regulatory requirements.
Mr. Newton has worked in the space for a while, long enough to see the internet’s transformative potential, even at its earliest stages.
“Most importantly I had a boss who was my mentor,” Mr. Newton recalled. “He taught us technology’s place in the progression of mankind. From the arrowhead to the space shuttle it has influenced society.”
Just as the renaissance gave us the printing press, this generation’s contribution to the production and distribution of information will be the internet, Mr. Newton said, citing its ability to empower individuals over institutions.
“The telephone is closed and permission-based,” Mr. Newton said. “The internet is open and you can innovate on top.”
And did that innovation ever come, which meant regulation soon followed. In 1995 Mr. Newton cofounded the largest trade association of internet service providers which numbered 400 at its peak. They worked to develop early anti-spam legislation and to protect online anonymity. He credits an internet tax moratorium for allowing companies like Amazon and eBay to flourish.
Mr. Newton said he enjoys being at the intersection of taking a nascent technology mainstream while also looking at the broader policy impacts.
“In 20 years I learned it’s about building good companies more than it is about being transformative,” Mr.Newton said.
Still Mr. Newton immediately saw the transformative power of the blockchain when he attended his first bitcoin conference three years ago.
“Here was another technology democratizing value transfer,” Mr. Newton recalled thinking. “It’s another technology fundamentally empowering individuals, not companies. Blockchain technology is another way like the internet to fundamentally change the way society interacts with each other.”
Well beyond the benefits to any one sector is the blockchain’s potential to positively impact people’s lives across many, Mr. Newton explained. But there are challenges to overcome if it is to approach that level of transformation. Wallet naming services need to be as simple as the mnemonic domain names that drive the internet. Netki addresses that by taking an actual wallet address, which could be “1CpLXM15vjULK3ZPGUTDMUcGATGR9xGitv” and allowing the owner to convert it into something they can easily remember and share with their circles, such as “Wallet.BanklessTimes.great”. Consumers head to the Netki website, register their name and password, pick a wallet name, and then pay an annual fee starting at $9.99 to reserve that wallet name for one year.
A proper payment protocol for blockchains would also help, Mr. Newton said. When someone has a little green lock next to their name others can be more confident they are sending payment to who they mean to and not a fraudulent address. Such a move also helps receivers with proper record keeping.
You can also allow for two-way identity exchange, Mr. Newton said. Once both the sender and receiver approve each other’s identity, then documents can be signed and sent to the blockchain. These developments also allow companies with regulatory compliance requirements to safely operate on public and private blockchains, he added.
Mr. Newton said widespread blockchain adoption isn’t hindered by the fear of the unknown. There needs to be more education about good and bad use cases before a company enters the production phase. As those projects develop Netki can work with them to build out automated onboarding and validation processes, which include allowing users to validate their identities and complete other tasks from their mobiles.
“The applications are exciting, and there’s a parallel to the internet where we are doing the obvious things now but looking forward to apps we cannot envision yet – Uber, Pokemon Go, Airbnb, maybe the next Facebook or Google.”
Financial institutions are doing the cumbersome work of linking new technology to legacy systems while ensuring compliance, Mr. Newton said.
“It is a lot of work.”
With blockchain initiatives, the majority of the work involves getting the needed data out of legacy systems, he added.
But back to the possibilities. Near-immediate gains in the Third World could be realized by combining blockchain technology with international money transfers to benefit the millions of people who are unbanked and living in poor regions. Banks have big user populations in the First World and banking licenses in the Third World, but there is a shortage of low-cost remittance corridors. Combine the benefits of the blockchain with the proliferation of mobile phones and you get more money to more people more quickly than ever before and bring them into the economy. Use digital currencies in a peer-to-peer format to provide credit at 11 per cent instead of the 17 to 30 per cent charged at Brazilian banks, for example.
“You can use blockchain and digital currencies to arbitrage that border,” Mr. Newton said.