March 11, 2020
By: Caity Witucki
Contributing Editor, C-Suite Wednesday
C-Suite Wednesday – The Impact of Blockchain Technology on Small Business Lending Institutions
On March 4, 2020 the House Committee on Small Business held a hearing to explore how blockchain technology could be used to support small business growth and modernize SBA lending.
“I know that when most people hear about blockchain they automatically think of cryptocurrency and Bitcoin,” Chairwoman Nydia M. Velazquez told the Committee. “While blockchain is the technology that enables the existence of cryptocurrency, by no means is that its only use. As a member of the Financial Services Committee, I have heard firsthand how blockchain technology is being utilized in payment processing by large banks and insurance companies.”
Blockchain refers to a database that is shared across a network of computers. Once a record is added to the database, it is very difficult to change because the network of computers make constant checks to ensure all the copies of the database are the same. Aside from cryptocurrency, blockchain technology can be used for secure record-keeping, maintaining the history of a product, and cybersecurity.
“In this age of technology […] why do we require such antiquated processes such as filling out paperwork, spending hours in long lines, and physically showing up at inconvenient locations?” One of the witnesses, Shane Bigelow, asked the House Committee. “We have failed to become fully digital because there’s been no incentive to change. The ecosystem around vital records – banks, insurance companies, hospital systems, etc. – have accepted the legacy process of using paper as a cost of doing business. That was acceptable 20 years ago when our technology could not fully support a digital process but that is unacceptable today.”
In addition to modernizing SBA lending, the committee explored how blockchain technology could be used by small businesses to streamline operations, reduce reliance on costly third-party intermediaries, and boost cybersecurity networks. It was ultimately determined that by deploying blockchain effectively, the technology could have a positive financial impact on lending institutions, small businesses, and government agencies.