New emergency finance tool for crisis scenarios

Fintech experts from the University of Stirling are building a new digital financial tool that will use blockchain to deliver emergency finance to groups of people during crises, such as COVID-19.

The EmFi (Emergency Finance) system aims to deliver payments from public bodies – such as local councils or, potentially, central banks – to specific groups of people or businesses in socio-economic crisis scenarios.

Currently, targeted payments are inefficient, with high administration costs and overheads, and they struggle to reach those who do not engage with society in the same way as the majority of the population – for example, those who choose not to use a bank. These can often be the people who are most in need. The EmFi framework fosters financial inclusion, using mobile apps and even experimenting with ways to include the “digitally unconnected” in forms of digital money.

Lecturer in Computing Science Dr Andrea Bracciali

Computing expert Dr Andrea Bracciali, of Stirling’s Faculty of Natural Sciences, will design the technological infrastructure for EmFi, as part of a partnership financed by the Algorand Foundation and delivered in collaboration with Qfinlab, the Quantitative Finance Laboratory of the Department of Mathematics, the Politecnico di Milano, and digital innovation company Cefriel.

Algorand technology – developed by the Massachusetts Institute of Technology professor and Turing Award Silvio Micali – represents a further innovation in blockchain-supported Distributed Ledger Technology, from models such as Bitcoin and Ethereum.

Dr Bracciali explained: “If councils want to help families to buy medicines, incentivise people to shop local, support the hospitality trade, or make a basic income payment to the population, then digital and ‘programmable’ money is the most efficient way to identify, validate and support the beneficiaries, preventing fraud.

“Public bodies across the world are grappling with the issue of how to do this in a flexible, efficient, accountable and secure way. Digital money is an innovative technology that could be a far more efficient system than the status quo.

“Digital tokens can be exchanged almost instantaneously, minimising infrastructure costs, and converted to currencies like pounds or euros at established rates. Unlike cryptocurrency Bitcoin, the EmFi ‘tokens’ being developed would not be freely tradeable.

“Distributed Ledger Technology offers the highest protection against theft, and makes interventions accountable and transparent, which is particularly sensitive in contexts where organised crime is prominent and in emergency scenarios.

“The challenge, however, is to establish accountability while guaranteeing privacy, a key right in our digital future.”

To this end, the EmFi system, led by the Politecnico di Milano, will be tested in a pilot with the City Council of Milan to deliver payments for textbooks to local primary schools. Digital innovation company Cefriel will deliver the prototype and look after the implementation. 

Professor Daniele Marazzina, of the Politecnico di Milano, said: “The union of the skills of Stirling, Politecnico and Cefriel is a great added value for the project, which aims to develop a real use case for traceable and fast payment systems – fundamental characteristics for Decentralized Finance (DeFi). Moreover, the project will be designed to permit payments also to unbanked and unconnected subjects.”

Blockchain expert Nadia Fabrizio, from Cefriel, added: “The technology is ready to be tested in a real environment. Algorand offers a unique framework to test sustainable finance scenarios, the potential impact is very huge. The benefits are not only for users, but also for administrations, in order to simplify the end-to-end supply chain in finance and to make it more transparent.”

Dr Bracciali concluded: “Through this project we want to create connections and develop expertise and know-how that can be transferrable and scalable later on. Scotland’s fintech sector is very lively, we are collaborating with institutions and companies, and we’d like to see it grow further through innovative international projects like this.”