Laurie McCabe: Blockchain is a big topic – and one that many people don’t understand. Can you explain it in terms so that someone who doesn’t know anything about it can understand it?
Bharath Kadaba: Blockchain is all about the exchange of value without the need for a middleman to orchestrate and validate that exchange. With blockchain, people can create, verify and enforce value-based transactions in a safe, secure and transparent way, so they can negotiate and transact in real time, directly with each other. Because each transaction is immutable, encrypted and protected by permissions, no one else can tamper with it.
LM: Can you share an example?
BK: A good example is real estate transactions. When a buyer is ready to close on purchasing a home, he or she puts the money in an escrow account held by a third party, such as a bank. The bank is a trusted middleman in the transaction to ensure that the buyer has the money for the down payment, and that the seller will get it when the purchase closes. And, of course, the bank gets paid for playing this role.
With blockchain, the parties can make this exchange directly, over the internet, in a secure, trusted way. Because there is no middleman, costs are reduced, and so is the time it takes to complete the transaction. The technology is revolutionary because it can eliminate friction from the exchange process.
LM: What are some of the things that are essential to making blockchain work?
BK: For the blockchain to work, parties need to agree to pre-established terms, such as the nature of the transaction and how they will work together. Once these rules are established, the blockchain records transactions on the participants’ individual, decentralized blockchain ledgers. Each individual ledger independently verifies that the transaction is valid by double-checking the information with the other ledgers involved. Blockchain can also enforce the terms that the parties agreed to for the transaction, such as net payment terms, and it secures the transaction with encryption technologies.
LM: How does Intuit see blockchain helping small businesses in the future?
BK: Intuit’s mission is to make it easy for small businesses to get value from technology. When we launched QuickBooks®, it was all about helping small businesses manage their businesses and finances more easily. Over the years, we’ve used new technologies to add new capabilities to our solutions, so that small businesses can take advantage of them without having to become technology experts. We’ll take a similar approach with blockchain. Small businesses shouldn’t have to figure out how to use blockchain; we explore the capabilities to use it as part of the Intuit solutions they already use every day.
LM: How can this help small businesses?
BK: Small business owners deal with value exchange every day, and that is filled with friction and sometimes risk. For example, say a small business needs a loan. To qualify, the business must qualify for the loan. They need to supply information about revenue, expenses, invoices and more to prove they’re a good investment.
Or, suppose the small business wants to work with a new supplier. That supplier may require 50 percent of the payment in advance of shipping the order. The small business owner may be concerned about whether they can trust that supplier to fulfill on the order once they’ve paid the 50 percent.
Blockchain takes a lot of friction out and puts trust into the transaction because the parties involved must first agree to the parameters for the transaction. The information that you share in the blockchain is protected and secured, so that no one can tamper with it. And, the amount of information you share can be controlled. In contrast, blockchain protects your information. It encrypts it, specifies who can see it and for what period of time. For instance, you can specify the data is only available for the next 12 hours.
LM: Can you provide a “real life” example of how a small business will be able to benefit from blockchain in the future?
BK: Let’s take an example of a small pool cleaning business. Today, the pool cleaner and pool owner create an agreement as to when the cleaner will come in to clean the pool, how much it will cost for each visit, and to provide chlorine or do repairs, as needed. The two parties have to agree about the schedule, pricing for the visits, and any extra maintenance and supplies. The pool cleaner has to send an invoice to the pool owner after each visit. And, if the owner is late with the payment, the pool cleaner needs to send out reminders to get paid.
The pool cleaner has to spend a lot of time keeping track of all of this – when they’d be better off providing service, as needed, and selling their service to new clients.
With blockchain, the pool cleaner and pool owner can create a “smart contract.” They establish terms upfront, and payments are automatically transferred from the pool owner’s account to the pool cleaner when the cleaner cleans the pool, does maintenance or provides any kind of extras that both parties agreed on in the contract. The smart contract is executed, automated and secured via the blockchain.
LM: It takes a lot of time out of the process.
BK: Right. That’s why blockchain is about more than just money. It can be a value exchange. In this case, I clean your pool, and in turn, you pay me for the service that I provide.
LM: What is Intuit working on to help make blockchain useful for small businesses?
BK: We are always exploring new technologies in benefit to our customers. We enabled Bitcoin payments about two years back. Not too many customers are using this yet, but the volume is steadily increasing as more small businesses want to accept cryptocurrency and get more comfortable with it.
Looking ahead, we’re working on several ideas to use blockchain. We want to use it to help make transactions more convenient and secure for small businesses. We explore blockchain capabilities in our solutions to remove pain and increase trust. We will continue to experiment and see how we can provide small businesses with the most value from it.
LM: Do you see any particular industries or small business micro verticals that have the best potential to get value from blockchain?
BK: Supply chain because trust is involved in every step of the supply chain. Large companies are already using blockchain for supply chain transactions to take cost and friction out of the process. At some point, smaller suppliers will need to be part of this ecosystem, and Intuit is working on things to help make this possible.
