Hey, Micro Business! Blockchain Is For You, Too
Everyone's familiar with the blockchain hype when it comes to large banks, multinationals and institutions, but what's less familiar is that distributed ledger tech could be no less revolutionary for small and micro businesses.
To an extent, this will come as the result of trickle-down effects from big adopters: blockchain tech will reportedly reduce the transaction and infrastructure costs of banks by up to USD 20 billion a year by 2022, for example, which in turn will see their small-business clients benefit from such savings in the form of cheaper transactions and financial services.
However, many of the blockchain benefits accruing to small and micro businesses will be direct, since by using distributed ledger tech these businesses will not only reduce their own costs and sidestep numerous middlemen, but they'll also be able to maximise their own dynamism and adaptability, which is often greater than that of big businesses mulishly attached to legacy systems.
Financing and payments
According to Paul Mitchell, the blockchain and fintech lead at PricewaterhouseCoopers SA, small businesses will take most of their benefits from distributed ledgers in the form of reduced costs.
"Blockchain is going to dramatically change transaction costs in all sorts of ways, through tokenization and through the removal of middlemen," he tells Cryptonews.com. "This will create new shapes for some industries, and small businesses are well placed to take advantage of that."
At the moment, concrete examples of a small or micro-business using a blockchain to cut down on overheads are very scarce, yet such businesses are becoming increasingly aware of and receptive to the crypto technology.
“We, at Just Posh Masks, have considered accepting bitcoins as a payment method on our website,” confirms Tracy Porter, the director of the UK-based micro-business Just Posh Masks. “Our website is a Magento-based ecommerce website and Magento have recently launched an add-on called BitPay which would enable all companies who use Magento […] to accept bitcoins as a method of payment.”
Also, the blockchain’s potential is there in the form of the growing number of platforms offering their advantages to such businesses.
For instance, there are already several platforms that use blockchains in order to offer lending or funding to small/micro businesses at more affordable rates, including Wish Finance, Debitum, Bitbond, and Acorn Collective (and forgetting all the initial coin offerings (ICOs) that provide startups with a non-conventional source of funds). There are also blockchain platforms that provide lower cost payment solutions for small businesses, such as Veem, CoinPip, Liquidity.Network, and Bitwage.
In fact, the benefits don't stop only with more accessible credit and cheaper payments solutions, since blockchain expert Torben Craner explains to Cryptonews.com that the blockchain-enabled use of smart contracts will be of particular interest to small and micro businesses. He says, "any startup or small business can meet regulatory requirements using blockchain and smart contracts. A smart contract can secure that VAT and tax is paid directly to the government."
The advantage of smart contracts – which are offered by an increasing number of blockchain platforms – is that they can automate the execution of certain necessary actions, thereby making it cheaper for companies to stay on top of various obligations.
"Blockchain will most likely be a solution to many enterprises and their wish to optimize operations and gain better control of regulatory requirements,” Craner adds. "The number one killer for small businesses is tight up revenues in claims and unpaid bills for giving services. Blockchain with smart contracts can help quick settlements and trusted releases (we deliver on time in full, you pay instantly)."
In sum, blockchain tech will enable smaller companies to be more efficient, which by extension will enable them to do and offer many of the things that were formally the preserve of large corporations. For example, the boutique airline Surf Air recently began using a blockchain-based loyalty programme designed for small businesses, something that would have been too expensive and complicated in the past for many small businesses.
Adoption and agility
Of course, all of these positive predictions are jumping the gun somewhat, since unlike huge multinational behemoths such as Microsoft, Apple or Amazon, small and micro-businesses tend to follow the times rather than lead them.
In other words, as Paul Mitchell confirms, they will have to wait for adoption to spread more generally before they can adopt themselves. "The adoption will depend to a large extent on other people adopting it," he says, "and small businesses will need the blockchain ecosystem to be more developed as it will be uneconomical for them to do everything themselves.
Torber Craner agrees. "Well, first of all we need to expand the knowledge of blockchain to the common user," he explains.
"Many new start-ups are offering solutions that will help small businesses with very low cost but they need to know that it is there for them […] But then we need to educate people in how to use and adapt the solutions. And that is a huge potential area for consultancies around the world."
This creates the sense that we still have a long way to go before the smallest businesses will adopt blockchain en masse. However, Craner believes it isn't that far away. "The vast adoption will come when people realise the alternatives to centralised systems. I think that the EU GDPR has ignited the awareness, and maybe within 2-4 years we will see the vast majority move towards blockchain supported platforms and systems."
Two to four years isn't all that long in the grander scheme of things, and what's exciting is that small and micro businesses are often better placed to adopt new technologies than big, lumbering organisations, which are sometimes too heavily invested in past systems. "Small businesses have the advantage of being agile and quick to change direction compared to big businesses," Craner says, while Mitchell echoes his sentiments: "The potential is that they are more agile so can shift business models more easily."