I finally understand Blockchain and so can you…

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The concept of Blockchain has been just beyond my firm grasp for some time. I’ve spent hours researching it, and its application in the travel industry. I’ve written posts about it, thinking I’ve understood it. But in reality, it took a recent Big Ambitions webinar with ABTA, Amadeus and FCM Travel Solutions for the aha moment to hit.

You can listen to the webinar here but if you don’t have an hour to kill like I did and you want in on the Blockchain craze in 10 minutes, read on:

What is Blockchain?

According to Sara Pavan, Amadeus Head of the Innovation Partnership Program, Blockchain is a new way of conducting digital transactions that involve value – money, goods, properties and assets.

Huh? I hear you say

OK, like Sara does in the webinar, let’s break it down into a useful metaphor:

I’m writing a letter which you need to edit. In yesterday / today’s world, I would write it on Word and send it via email for you to edit.

The problem with this scenario is that you need to wait until I’ve sent you the letter before you can edit it. And I need to wait for you to return it before I can see what you’ve edited. One party is locked out of the editing until the other party is finished.

And this is how databases work today. They cannot have two people working on the same record at the same time. So if you’re a bank for example, the transaction is ‘locked’ while another bank is working on the record. The records are not simultaneously synchronised.

Enter Google Docs where two or more parties have access to the same document at the same time, so one single version is always visible to both parties.

Blockchain does the same for a record or ledger as Google docs does for a document. It gives two or more parties access to the same record / ledger at the same time and ensures that these ledgers are synchronised so that every part of the network has an updated version of that ledger in real time.

How does Blockchain work?

  • Decentralised database
  • Info can only be added
  • Use of cryptography
  • Transactions by consensus
  • Smart Contracts
  • Decentralised Database

Sara explains in the webinar that Blockchain is a decentralised database that is shared, replicated and synchronised across a network of different users spread across multiple sites, institutions and geographies.

  • Information can only be added

Information can only be added to network, it can never be removed.  And, the information is controlled, authenticated and validated by all the participants of the network, not just one central administrator, which makes it extremely transparent.

  • Use of cryptography

Blockchain uses cryptography to secure a transaction. This is important, says Sara, because it means each participant has access to a copy of the network and is able to trace information at any point of time. It also means the information cannot be seen by everyone. You need to have control of a private or public key, like a password, that will give access to different users the level of information you want them to see.

  • Data is secure

Encryption elements make sure that the information remains encrypted unless you have the key to access it. What’s more, it’s extremely difficult to corrupt the information because you would need to convince different nodes of the network that the information is valid before they in turn endorse or validate that information. It’s really not as simple as manipulating one server, explains Sara.

  • Transactions by consensus

Transactions are effected by consensus. All parties have to confirm whether the transaction is valid and only once it is approved by all parties in the network, is it effected and time-stamped. This is a powerful way to prove when something was created and what it is.

  • Smart Contracts

Most of Blockchain’s application run on Smart Contracts, which are self-executed contracts where actions are triggered based on predesigned set of rules. There’s no need for any central authority to validate the action and confirm whether that action needs to take place. The transaction is automated across a network of participants based on trust and an accepted set of rules.

What about travel?

That all sounds marvellous, but how would it apply to travel?

According to Sara, it’s actually ideal technology to be used in travel.

Think about it, transactions and data are shared among several parties and touchpoints continuously during the travel journey. Several ‘actors’ need to collect, store and share traveller and operational information. Blockchain could assist with this very complicated web of requirements.

Amadeus has defined four areas in travel where Blockchain can bring considerable benefit:

  • Baggage Tracking
  • Simplifying passenger identification
  • Developing new user-friendly loyalty schemes
  • Simplifying cross-border payments
  • Baggage Tracking

The problem: Baggage tracking involves multiple actors – airlines, ground handlers and airports – which are often not connected to each other and this leads to mishandled baggage which costs more than US$2.3bn a year to resolve.

Imagine you are flying from Johannesburg to New York, stopping in London. You could have up to seven players involved in handling your baggage – the airlines operating the connecting flight and the ground handlers at every touch-point.

In today’s scenario, baggage information is shared with the next actor that will come into contact with the bag, not with all the actors who will eventually ‘touch’ it until it is there turn to handle it. So, the bag message is sent from one actor to another, but is not shared with all the actors simultaneously.

The Blockchain solution: Blockchain can offer a new way of sharing information among all actors, while allowing each of those players to keep their own baggage reconciliation systems and remain in full control of their own information, but sharing in case of disruption.  You could even have a Smart Contract in place that would automatically trigger an insurance payout if the bag has gone missing to improve the traveller experience.

  • Simplifying passenger verification

The problem: The traveller ID process is repeated several times across the traveller journey – from booking, to check-in, to gate control, to baggage drop, etc. Currently, it relies on different identification solutions that are inefficient and contribute negatively to the traveller experience.

The Blockchain solution: By combining Blockchain with other technology solutions such as mobile and biometrics, we can enable the traveller to store their identification information, including their passport photograph, through a digital token that is accessible through their own mobile device.

So, when the traveller arrives at a checkpoint, they just need to show the QR code on their mobile, which is digitally linked to the traveller’s information stored on Blockchain.

On the other side, the agents and authorities can use the same technology to scan the QR code and collect the information needed to verify the passenger’s identity.

This information is passed in a very safe, digitally encrypted way and once all the verification checks are validated, the traveller gets the green light and can move to the next ID check point.

  • Developing new user-friendly loyalty schemes

The problem: If like me you’re one of the 60% of loyalty scheme members who don’t bother to use their miles because it’s just too difficult, you’ll understand the problem immediately. It’s almost impossible to know how many miles have been accumulated, how they can be spent and when they’ll expire.

The Blockchain solution: Sara explains that Blockchain technology could help you could access all loyalty points in one unique digital wallet and accrue those points as you accumulate them, which would allow you to redeem or transfer the points immediately.

Imagine also that there was a community-driven marketplace where you could exchange the points instead of the limited options that vendors currently offer. Blockchain could help to automate the interoperability of different loyalty programmes by helping many vendors become one big vendor through Blockchain technology.

  • Simplifying cross-border payments

The problem: Global payments take days to settle and quite often those delays have nothing to do with the payment solution behind the scene. Rather, the delays are caused by a country’s inability to handle real-time settlements or cumbersome foreign exchange regulations, like we have in South Africa.

The Blockchain solution: With Blockchain, we could improve the settlement time and reduce the fees and number of actors involved by streamlining the process. Essentially, we would be using one common currency, even if it is a cryptocurrency, in the transaction so there would be no need for exchange fees or fees levied by intermediary parties ‘transferring’ the currency.

It is likely that cross-border payments would be operated in a private Blockchain, where the network of participants (banks) would be controlled and define who is allowed to perform the transaction and how it is allowed to happen.

Sara acknowledges that although Blockchain is showing a lot of potential in the travel sector, it is still at a very early stage. At best, we’re going to start seeing live pilots soon, but widespread adoption will take several years.

We are however seeing several travel players dabbling in the area, says Lloyd Barkhuizen, FCM Travel Solutions Head of MEA Sales. Singapore Airlines has launched the world’s first Blockchain-powered loyalty programme, which is a digital wallet for frequent flyers that will allow members to spend their air miles at retail partners for point-of-sale transactions.

FCM Travel Solutions has written a comprehensive Blockchain White Paper which can be downloaded here

Additional use cases for Blockchain in travel, concludes Sara, are in insurance claim automation, reputation scoring and hotel check-in automation, among others.

And that’s a wrap on demystifying Blockchain in travel. If you found this information useful and want to learn more about what’s happening in the world of travel, travel marketing and travel technology, sign up for our newsletter or follow us on Facebook, LinkedIn or Twitter.

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