Will disintermediation happen through the blockchain?

Editor's picks

By David Beach | 13 April 2018

This editor's picks is all about real use cases of blockchain in the financial industry, in preparation for our live podcast on Monday 16th at 10:30am "How long until blockchain makes a telling contribution to financial services?"

Together with IBM, Barclays and exciting newcomers, Synswap, we'll dash away Monday morning blues with a robust examination of blockchain's real use cases and just how much of an impact this fascinating emerging technology could bring. [Edit: Follow the same link to listen on-demand]


 

It's often used as an icebreaker at networking events between strangers.

The general patter of platitudes is quickly followed by a stifling silence until someone raises an eyebrow and offers "So... blockchain?"

An hour and a half later, you're still around the same table thrashing out the finer details of blockchain's real use cases in the financial services.

 

How realistic is the blockchain dream?

It's certainly something to get excited over. Born in finance and created for finance, Nakamoto's whitepapers may prove to be a significant milestone in the history of banking. Only the most ardent followers profess the bitcoin blockchain dream of a decentralised universal currency, impervious to authority meddling, a bastion of truth that immutably archives ownership.

Sean Clark certainly thought so when he spoke to bobsguide, and left a stark warning for banks: "Disintermediation is coming and it will happen through the blockchain."

Read the full article here: Inside the mind of a bitcoin miner: Why you should buy in a crash

 

A compromise - the rise of DLT

If the bitcoin blockchain's buzzword was 'decentralised', then the distributed ledger technology (DLT) adopted by many a bank's innovation hub has 'permissioned'. It is seen as a compromise that gives banks some control over the process, using the underlying efficiency and power of the technology while retaining the driving seat. In London's blockchainweek in early February, Jason Kelley, Global Head of Blockchain, spoke of how they were building the technical (and business) infrastructure that would allow many innovative startups to leverage blockchain technology to deliver exceptional services.

Read the interview with IBM's Global Head of Blockchain:

IBM Global Head of Blockchain interview: The future of enterprise blockchains in financial services

 

A solution looking for a problem?

It is also often said that blockchain has not yet found that killer application. One particular area may be how regulators can use distributed ledger technology to ensure compliance.

"The need to demonstrate secure data storage and consented data sharing has never been more pressing" writes Andrew Hewitt of FIS, as he, like many others, look ahead to the challenges and pitfalls of GDPR.

Read more on Hewitt's take here: How DLT can be used to achieve GDPR compliance

 

Correspondent banking: The biggest shakeup in a decade

Another sector within financial services tipped to be heavily disrupted by this emerging technology is correspondent banking. Whether SWIFT's historic grip on the sector will remain solid is yet to be determined as cross border payment challengers enter the market.

One such challenger is Ripple. Marcus Treacher, a former executive of SWIFT, and now Global Head of Strategic Accounts gave bobsguide a rather diplomatic view of how Ripple viewed the incumbent.

"I think Ripple is going to disrupt the world within which SWIFT exists, for the better. SWIFT will have two choices, either to move with the changes or lean into their unique value as a governing body representing thousands of banks. SWIFT has been incrementally improving its technology - with gpi, for instance - but it is yet to make that fundamental shift."

"To analogise this, when it comes to improving payment technology, it’s not about putting faster trains on the existing rail infrastructure. It’s about building an airplane. SWIFT gpi is a n incumbent reaction to a landscape that is seeing the beginning of change that they’re not prepared to adopt."

Read the full article here: How Santander will use Ripple to execute cross-border payments | Analysis of the deal

 


If you enjoyed this editor's picks and are interested to hear the perspectives of the financial industry on the applications of blockhain technology, join us for our podcast entitled "How long until blockchain makes a telling contribution to financial services?" as we explore the brave new world of blockchain with an expert panel from technology, banking and startup.

 

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