The challenge
Programmable money
Smart money, or programmable money, is money that can be programmed to be spent only when certain conditions are met. It can also remember how it has been spent, and by whom.
Conditional payment environments are all around us and occur whenever one party wishes to fund a payment, so long as certain conditions are met. The National Disability Insurance Scheme (NDIS), for example, involves highly personalised payment conditions; each NDIS participant has an individualised plan, which can contain multiple budget categories each with different spending rules.
This high degree of tailoring offers greater choice and control for participants, but also creates new challenges for accessing the right services, managing budgets and making payments. Providers also need to ensure that the services they deliver are eligible for payment.
We explored whether smart money could assist with these challenges.
Our response
Using blockchain to create smart money
In partnership with the Commonwealth Bank of Australia (CBA), we developed and tested a prototype app to explore the potential for blockchain technology to create smart money, using the NDIS as a motivating example.
The blockchain component was developed as a system using tokens to represent promises to pay in Australian dollars (AUD), smart contracts to create spending conditions based on NDIS plan rules, and registries to represent parts of the payment environment such as lists of eligible service providers for particular services.
In the laboratory tests, NDIS participants and carers could use tokens to book and purchase services through a smart phone app. The proof of concept was designed to support self-managed, plan-managed and agency-managed participants.
In the proof of concept, a service provider would receive blockchain tokens on delivery of eligible services. Tokens would be transferred to the National Disability Insurance Agency (NDIA) for payment in AUD through the governments new payment platform within seconds and include remittance information to enable automatic payment reconciliation.
The data from bookings and transactions can be viewed in real time.
The proof of concept design was informed by engagements with the NDIS participants, carers, service providers and a Project Reference Group.
The results
Potential to provide greater empowerment for spenders
The case study demonstrates that smart money technology holds real promise with the potential to generate greater empowerment for spenders, greater payment certainty for businesses, and greater spending integrity for funders.
Test participants and carers estimated that prototype app could save them between one and fifteen hours per week, while service providers estimated potential cost savings of between 0.3% and 0.8% each year.
CBA modelling indicates that, even if these estimates were applied conservatively across the NDIS ecosystem, the economic benefit would equate to hundreds of millions of dollars annually, if the proof of concept was leveraged to develop and implement a full-scale solution (read the full report for more details).
Further work is required to deliver refined solutions for the technology but if progressed successfully, smart money could enable automated conditional payments across the economy, and through this, improve the financial well-being of people, businesses and communities in Australia.
Find out more: Smart Money
