Digitization is coming to all services, also linked to physical services. It will change the user experience significantly. It helps us to get rid of many complex and time-consuming processes. Especially the combination of blockchain and IoT offers new powerful tools for this.
Let’s take examples that have been introduced to me most recently.
When you buy a house in the future, you can sign the agreement with a smart contract. This signing then triggers an automated process. The payments and loan agreements are accomplished. You are sent digital keys (e.g. to your mobile) to get into the house. The sale starts a process of finding suitable insurance with data that comes directly from your house, and you can select the best one, with the same process for utility contracts.
You can get a car for your use based on your needs. It can be for a single drive or longer-term. All agreements, payments and insurance needs can be handled digitally immediately. There can be different pricing models based on your needs. This works also for self-driving cars and you can even send the car to collect something and it can handle a signing and payment when it completes the delivery.
You can manage and “carry” your own finance and health care data with you. You can control how and when it is used, and you can track its users and their access. When you need health care or a loan, you can get offer offers based on your own data. The same for insurance contracts.
Probably these examples are even simplified, as we cannot even imagine all models to use these two things together in the future. They regardless give an idea about the opportunities to build new services. It will change significantly, how services are offered in the future.
This will especially change the user experience. For example, all processes above now include a lot of paper work, take a lot of time, and the data is not properly utilized (for example, you easily pay extra for home or car insurance, when it is hard to find the optimal one). We can compare the scope for change to how it was to book a trip before internet travel services. You had to find information from brochures, booklets, and travel agencies, fetch tickets and hotel vouchers and have everything on paper with you. But this change can actually be bigger, when it gets many services to work together and is also linked to physical services and devices.
Technology for these services start to be available now or very soon. A more complex question is, who will implement the actual end-user services, how the business models will look, and if the development is more a disruption or an evolution. Telecoms carriers, finance institutions, cloud companies are all linked to these services with other parties like real estate, car, and logistics companies. But are any of them able to offer smooth end-user services, or do they only implement lower level parts in the value-chain?
Technology enables new things, but it needs business models and good customer experience to really change the world. TCP/IP existed since 1960s, but only in the 1990s did we started to get user friendly services and businesses to utilize it. Nowadays, development is faster. It also often so that incumbent players have been able to maintain certain roles, when the Internet has changed a business, but newcomers have really took the major part of a new business. You can think, for example, advertising and media businesses, where many old media and ad companies still exist, but companies like Google, Amazon, Facebook, and Netflix have been the biggest winners and prevail with their new models.
We are going to see a race for these new services. We can already see that carriers, banks and insurance companies are becoming more active to utilize new technology. But to really offer these new services we need much more than a conservative technology development. It requires risk taking with new business models that can also cannibalize existing business lines. Therefore it is not easy for large incumbent companies.
These new services are based on distributed models and data, open APIs and smooth cooperation of many components. It doesn’t even make sense to try to dominate these services alone. For each company, it is much more important to choose and accept their position and focus on playing that position as well as possible. If someone tries to make it alone, they can lose a lot of money and be out of the actual dominating ecosystem. So, each party should select its own strategy and then start to constructively cooperate to have a valuable role in the ecosystem and value chains.
The article first appeared at Telecom Asia.
Est. 2009 Grow VC Group is the global leader of fintech innovations, digital and distributed finance services. Our mission is to make the finance services more effective, transparent and democratic. The Group includes leading fintech companies in their own areas.
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