Published on 1 July 2024
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Open transaction networks: the hidden key to growth and prosperity?

Open transaction networks (OTNs) are a form of digital technology that have the potential to democratise and open digital markets, drive innovation, and address societal issues. Carlos Montes explores the policy challenges involved in implementing OTNs to achieve this potential.

In today’s tech-driven world, many, especially tech billionaires, are technological optimists. Technology is portrayed as the ultimate panacea. However, this view is far from universal. For example, Daron Acemoglu, one of the most cited contemporary economists, argues that the benefits of technology often accrue disproportionately to those who control it, leading to the rise of powerful corporations with dominant platforms.

But what if there was a way to harness technology that empowers everyone, not just big corporations? This is where the concept of innovations that build upon the core principles of the early web — collaboration, open access, and decentralised control — come into play. But today’s inclusive tech ecosystems prioritise long-term sustainability, an aspect that earlier open-source efforts often overlooked

At the heart of this more inclusive digital future are open transaction networks (OTNs). These networks are already in existence in parts of the world. Brazil’s PIX and India’s Unified Payment Interface (UPI) showcase the power of interoperable payment systems, catalysing financial innovation and expanding financial inclusion. These systems are sometimes described as ‘digital public infrastructure’, highlighting their potential to support broader economic activity. Early signs suggest other open transaction networks in action may also turn into success stories. Use cases in India (commerce, energy, education, and healthcare), the Netherlands (transport), and Brazil (education) offer great potential and are validating the way for wider adoption.

However, few people are aware of the effective and affordable solutions offered by the open-source ecosystem. Take the upcoming UK General Election, for example. The next government will face tight budget constraints; but proven, open-source tech from elsewhere could be adapted for the UK, potentially boosting education and healthcare productivity while significantly reducing green transition costs.

Understanding open transaction networks

How do open transaction networks function, and why are they potentially revolutionary?

OTNs are systems that ensure interoperability across various platforms and services. They enable seamless discovery, information exchange, and end-to-end transactions, regardless of the specific apps or services being used. In essence, they replace closed, proprietary platforms with an ecosystem where competition, innovation, and collaboration can thrive.

OTNs operate on a decentralised architecture, using standardised protocols like Beckn. These protocols define how different systems can communicate and exchange data, allowing for seamless interoperability between various service providers and platforms. This is similar to how the internet uses HTTP to enable communication between web servers and browsers, regardless of the specific devices or software being used.

This stands in contrast to closed platforms where a single entity controls all aspects of platform governance e.g. transaction fees, user data, network access; OTNs are characterised by a decentralised network governance, where stakeholders share responsibility.

To understand the power of OTNs, let’s consider a practical example. Imagine a ride-hailing app that shows all available transportation options — taxis, buses, trains, scooters, and even bicycles — not just those from a single provider like Uber. This would bring all suppliers and consumers together in one app. This transparency and inclusivity is not limited to transport; it can apply to commerce, education, healthcare, green energy, and countless other sectors.

In healthcare, this could enable patients to access their medical records across different providers and book appointments with any specialist in the network. In education, students could access courses and resources from multiple institutions through a single interface. For green energy, consumers could easily switch between energy providers or sell excess energy back to the grid, all within one system.

Beckn Protocol powering the open transactions network

At the core of this revolution is the Beckn Protocol, aptly described as the open transactions’ engine. Inspired by the internet’s HTTP and mobile’s SMTP protocols, Beckn enables standardised decentralised communication. Beckn is an open-source technology, consisting of a collective. This means that it’s not controlled by any single entity or corporation, but rather developed and maintained by a community of contributors. Beckn is built for interoperability but is extremely minimal by design, serving as the foundation for a robust private sector innovation ecosystem.

Philanthropic teams led by Nandan Nilekani, the architect of India’s digital transformation and a founder of its second largest IT company, were behind Beckn’s initial development. Underlining the growing interest of the global business community to OTNs is recent attention from the World Economic Forum.

The economic promise of open transaction networks

The potential of OTNs extends far beyond convenience. They represent a fundamental shift in how digital markets operate. By breaking down silos, these networks allow businesses to seamlessly connect with users across the entire digital marketplace. This creates what we might call an “open internet of transactions” — a single platform where consumers can see all available options, not just a curated few. It’s akin to how the first-generation internet democratised access to information, but now applied to transactions and services.

By reducing barriers to entry and increasing competition, open transaction networks can lead to more innovative services and lower prices for consumers. They can also create new economic opportunities by allowing smaller businesses to reach a wider market without the need for expensive proprietary platforms.

From an economic perspective, OTNs have the potential to create more complete, transparent, and efficient markets. Imagine reduced search costs, easier market entry, and an unbundled, more competitive supply chain with wider participation from both suppliers and consumers. Regulators, too, are likely to be impressed by built-in interoperability.

For policymakers and politicians, the potential of OTNs to enhance the productivity of public service delivery, simplify the digitalisation of public services, and create the new markets needed to support a green economy, will be appealing.

Consider the example of healthcare. OTNs could eliminate the need for expensive, monolithic IT projects in the UK’s National Health Service (NHS). Rather, they could enable interoperable, open-source, modular, and reusable digital service components. Similarly, OTNs could foster green energy markets by directly connecting producers with consumers, optimising distribution and grid management. They could also enable seamless data exchange between waste producers, recyclers, and manufacturers, creating circular markets.

To achieve these benefits, policymakers, businesses, and individuals will need to understand and engage with the potential of OTNs. There are several policy imperatives, among them:

  • Introduce an appropriate regulatory framework, creating  regulatory sandboxes for experimentation.
  • Implement open data mandates in key sectors to support value-added innovation on top of OTNs. Ensure strong privacy protections and cybersecurity. 
  • Invest in research for robust interoperability standards. Promote international collaboration on standards and best practice.
  • Adopt OTNs in public services as demonstration models. Support SMEs in OTN adoption.
  • Develop educational initiatives and training programs to improve understanding and effective use of OTNs.
  • Encourage global collaboration on OTN standards and best practices. Work towards harmonizing OTN policies across borders for seamless international transactions.

By embracing these policies, governments can nurture an environment conducive to the growth and success of open transaction networks, unlocking their full potential to drive economic growth, innovation, and social progress.

The Cambridge Innovation Hub for Prosperity, a collaboration between Cambridge Judge Business School and the Foundation for the Interoperable Digital Economy, is working to research and support the adoption of OTNs.

Spanish version: Redes de Transacciones Abiertas: ¿La Clave para el Crecimiento y la Prosperidad?

The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.


Carlos Montes

Lead of the Innovation Hub for Prosperity, Cambridge Judge Business School CIGB

Carlos Montes leads the Innovation Hub for Prosperity at the Cambridge University Judge Business School. The Hub focuses on research and adoption of open transaction networks, considered “the most exciting...

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