Blockchain is the latest buzzword in the world of business and technology. If you’re a small business owner, you may have even heard of how this new technology could help you grow your business.
But what is blockchain? How exactly can it help small businesses?
Marwan Forzley, CEO of Veem, offers some information and insights in a conversation with the Bluevine Business Blog.
Founded in 2014, Veem is a blockchain pioneer. The startup is one of the first companies to use blockchain to help small businesses make it easier to conduct international and cross-border transactions.
A company profile in CNBC describes how Veem’s technology helps small business owners: “Companies typically use Veem to replace processes that required them to make a trip to the bank and fill out detailed forms.”
Forzley elaborates on the benefits of blockchain technology in this interview:
Bluevine Business Blog: What is blockchain? How would you explain it to a small business owner who has limited knowledge or even interest in technology?
Forzley: Blockchain is a platform of trust that doesn’t require a middleman or verifying party. It’s a single source of truth for every transaction or contract that’s recorded there.
In the past, sending money to your friend overseas would involve transferring funds through a bank, which would route the money through several other banks and then finally to its destination. Naturally, each bank would take a cut for their service.
Blockchain renders that system obsolete. Why pay someone for this service when blockchain allows you to do it yourself, safer and faster than ever before?
Every industry has its own unique middlemen, from payments to insurance to real estate. Blockchain fulfills all of these needs without the cost.
Bluevine Business Blog: How did you come up with the idea of using blockchain to help businesses process cross border payments? Did you come across any small business owner for whom cross border payments were simply a big hassle?
Forzley: Payments have always been painful for small business owners, but none more than cross-border payments.
Not only do small business owners have to worry about the cost and delays of traditional bank wires, but they also have to worry about losing their money as it bounces from intermediary bank to intermediary bank.
One of the biggest barriers for small businesses going overseas is trust. If you don’t have the money to fly to another country, meet your supplier and see your goods, how do you send them tens of thousands of dollars with absolutely no security offered to you by your bank? We give small business owners a level of trust by verifying that their supplier is a real person with a real business. We make the payments trackable so everyone knows where their money is.
As we continue to innovate with blockchain there will be so many more opportunities to ease the burden of global business on small business owners. They don’t have the luxury to send payments slowly, pay for expensive foreign exchange rates, or wait several weeks for a payment to arrive. They need a system built for small businesses, that works the same way they do. Blockchain technology can provide that.
Bluevine Business Blog: So how does it work? Again, how do you explain your technology to a business owner who doesn’t know much about technology in general?
Forzley: Blockchain is simply a secure digital ledger. One that can’t be tampered with or changed once a transaction is recorded.
If I’m sending money to supplier Anna in Germany, I input the details of our transaction into what we call a “block.”
That block is shared with everyone on the blockchain network, and they work to validate the transaction, ensuring Anna is a real person and that I have sufficient funds, much like a bank would.
Once the majority of the network validates the transaction, the block is permanently added to the existing blockchain (chain of blocks), and Anna receives her money.
The best ideas are often simple answers to existing problems. Blockchain is no different.
Bluevine Business Blog: Most people, and most likely most small business owners, are more familiar with “bitcoin”. What is the difference between “bitcoin” and “blockchain”?
Forzley: This is a common misconception with some unfortunate consequences.
Bitcoin is a cryptocurrency that travels on the blockchain. All currencies are prone to market fluctuations and bitcoin is no different. In fact, it fluctuates more than most.
Blockchain is the foundational infrastructure that bitcoin travels on. It has a life apart from cryptocurrencies, as we’re seeing its growing impact in other industries.
It’ll be blockchain, not bitcoin, that impacts small business owners, and the world, when the dust is settled.
Bluevine Business Blog: Cybersecurity and hacking have been in the news lately. Should this be a concern for many small business owners who are considering embracing blockchain technology?
Forzley: Quite the opposite. Blockchain is far safer than a lot of systems many small businesses are currently using. Once a transaction has been recorded on the blockchain, it can’t be deleted or modified.
Blockchain also removes the potential for human error from the system. Because everything is secured through cryptography, you don’t have to worry about mistakes, or worse, attacks.
Bluevine Business Blog: Let’s say I run a small manufacturing business with customers in Mexico or Canada. Can you give examples of how my business could be better off using blockchain?
Forzley: Your small manufacturing business would be a perfect candidate for adopting blockchain technology.
Small business owners don’t have unlimited funds to help cushion the ups and downs of doing international business. Any delay is real money they’re losing out on, money that could mean the difference between making payroll or not. Every cent matters to a small business owner.
A large part of doing international business involves regulations and bureaucracy. This is annoying in some countries and unbearable in others. Governments are turning to blockchain and smart contracts to solve this problem.
Instead of paying an agent or a lawyer to find the export documentation you need, you can simply use a smart contract to ensure you pay only after receiving the permit.
They can also receive permits quicker and cheaper, as it’s automated and doesn’t involve paying intermediaries.
These are just two examples, but there’s plenty more.
Bluevine Business Blog: Why did you decide to partner with Bluevine? How does invoice factoring fit into blockchain cross border payments?
Forzley: It’s a well known fact that 29% of small businesses fail, not because of a bad idea or a lack of effort, but because they run out of capital.
They’re either waiting for invoices that have never been paid, or not making enough profit from their sales.
Small business owners don’t have the safety net that larger corporations do. A few missed payments and they’re finished.
Bluevine, a company that shares our passion for small business, is a perfect fit for us.
Together, we help businesses send payments that can keep them growing, while working with Bluevine to provide small businesses with the financing they need.