How the blockchain could enable agent collaboration in the remittances market
by Soumya Kuber and Anil Radhakrishnan
Blockchain has recently garnered a lot of attention. From top banks to small retailers, organizations all over the world are trying to harness the potential of blockchain to introduce efficiencies and reduce friction.
The technology has given rise to startups trying to get their share of the remittances business, which serves more than 200 million people worldwide.
A sizeable portion of remittances move from developed economies — the U.S., U.K., Middle East and Australia — to developing economies such as India and China, where internet penetration is not up to the mark (15 percent and 43 percent, respectively).
This makes the use of digital solutions difficult and creates the need for an agent network. Agents ensure last-mile connectivity for remittances service providers and are responsible for some of the big players in the remittances space being able to compete with digital fintech startups.
At the same time, agent networks suffer from issues such as lack of financial incentives and the benefits of networking. A blockchain-based solution can enable better collaboration among agents, leading to increased engagement and improved incentives.
Employing blockchain in the agent network
While some agents service 20 customers a day, others may struggle to go beyond 20 in a month, making it challenging for agents to stay loyal to the remittances provider.
On top of the inconsistency, many agents are not receiving the incentives they expect. Because of this, remittance service providers need to find ways to keep their agents engaged.
A blockchain-based peer-to-peer payment system could be the answer. The proposition is to create an agent network using blockchain that ultimately binds all agents together, whereby agents can help one another using the distributed ledger technology.
In such a system, agents have visibility into the financial position of other agents and can chose either to request money or to lend money to registered agents while getting a cut of the incentive. For busier agents, this provides the ability to service customers more effectively. For those who are not as busy, it provides the opportunity to keep their money working for them.
In this solution, a dashboard that can be monitored by central agents is made available to all participants in the network. The dashboard displays information such as:
- agents who can remit money up to a certain amount up to $x;
- agents who can process higher amounts in the range of $x and $y;
- agents who can process amounts greater than $y;
- a status for each agent that indicate whether they have sufficient funds to help others in the network; and
- agent rating, popularity, proximity.
Benefits of a blockchain-powered agent network
This blockchain model has some major benefits:
- it lets agents provide monetary support to others who experience a shortage of funds;
- customers can be remitted at any outlet and at any time with the help of the network;
- the helping agent gets a cut of the incentive from the agent he has helped;
- revenue is increased for agents who have fewer customers; and
- it allows agents who have run short of funds to service more customers.
Most importantly, this network system will not need to be governed by any central authority. The smart contract-based system ensures that the system functions on its own, reducing the operational cost and effort. The beauty of this is that such a system of engagement can be replicated across any industry where a transfer of value can help create an incentivized system.
High-level architecture of a blockchain-powered agent network
To blockchain or not to blockchain?
Using blockchain, funds are transferred in near real time, leading to an enhanced (and possibly automated) customer service experience, predictable costs for funds transfers and accurate reporting of transactions.
Financial Institutions need visibility and availability of transaction history for both client servicing and regulatory compliance. This alone is a compelling reason to use blockchain powered agent network.
The network would enable organizations to gain the experience and insight needed to roll out expanded blockchain capabilities across the financial ecosystem. Organizations would be better off investing in payments and remittances to maximize their ROI on blockchain investments.
Soumya Kuber is a senior business consultant with a passion for working with banking technology solutions, coupled with an interest in emerging technologies, machine learning, data analytics and robotics.
Anil Radhakrishnan is a digital banking consultant at Mindtree with a focus on digital strategy in retail banking and payments. He has authored papers on emerging trends in banking customer experience.