Typically, financial institutions wait for a new technology to mature before investing in it. Blockchain technology, because of the impact it is expected to bring to the financial industry, is a different matter, as witnessed by the number of financial institutions investing in blockchain experimentation.
Two Netherlands-based banks, Rabobank and ABN AMRO Bank N.V., are among the latest financial institutions to venture into blockchain-based solutions.
Blockchain investment totals close to $1 billion, noted Arjan van Os, head of Innovation Centre, and Marjan van der Plas, innovation manager at Innovation Centre, in a blog on ABN AMRO’s website. Innovation Centre is ABN AMRO’s “corporate garage” in which the bank experiments with innovative business models.
“The speed at which it is developing, and the potential solutions it can provide, has triggered financial institutions to get in on the ground floor and get involved in blockchain’s ‘coming of age,’” van Os and van der Plas blogged.
Exploring Infrastructure ‘Fabric’
ABN AMRO is exploring the infrastructure “fabric” that will expand a distributed ledger and is developing applications to utilize its strengths. A distributed ledger could impact core bank processes.
ABN AMRO is examining where the technology will impact its operations. This could include cross-border payments, risk modeling and mortgages. By spreading its resources across various experiments, the bank is preparing for different scenarios.
More than 30 bank colleagues have volunteered to help explore blockchain possibilities, the blog noted. The bank associates involved span a wide range of departments. The teams are as diverse as blockchain technology itself. All members share the passion for exploration and discovery in the distributed ledger.
The teams, in varying compositions, work in a lean structure to prioritize and examine blockchain infrastructure aspects. The teams extract and review use case scenarios for six weeks in “design thinking workshops.” Should a scenario show potential, it becomes a structured experiment.
Joining Blockchain Projects
ABN AMRO is also joining blockchain startups and collaborations. The bank has committed to Digital Asset Holdings and Linux Hyperledger to examine single, open-source platform for bitcoin applications. Technology leaders from the top four Dutch banks are exploring the technology. They are testing various fabrics and exploring a first blockchain-based payment app.
The Dutch Payments Association serves as the coordinating party while the Dutch Central Bank participates in a regulatory aspect. All parties have joined the initiative mainly to learn collectively.
The blockchain’s smart contract capability and its “single source of truth” can change real estate. One possible initiative that could hold future development is evident in the bank’s mortgage experiment. The bank is developing scenarios and proofs of concept to examine how the blockchain could remove uncertainties with the estimation of collateral values.
Another possible scenario has to do with how the blockchain could solve financial audit and compliance ledger issues in the financial recovery and restructuring (FR&R) area. In conjunction with IBM, the bank is exploring whether the blockchain can help create uniform data in the FR&R chain based on a single shared ledger. ABN AMBRO and IBM will share the knowledge gathered in the project.
ABN AMRO has partnered with Tata Consultancy Services to examine the blockchain’s potential in settlement and clearing. The initiative is intended to establish a distributed ledger that integrates with legacy systems to deliver a “single source of truth” and enable cash settlement install payments. This will bring the bank one step closer to envisioning the future of finance, should it work.
These experiments merely scratch the surface. The uncertainty surrounding the blockchain is not a roadblock, but an opportunity. “And when blockchain is ready to transform the financial industry, we plan to be ready to transform right along with it.”
Rabobank Joins Nexuslab
Rabobank has partnered with Nexuslab, a blockchain launched by Nexussquared, a Swiss-based collaboration with Startupbootcoamp, according to Holland Fintech. Rabobank and Nexuslab are developing a European-based blockchain venture. Nexuslab has selected 10 global startups for its pilot program.
Rabobank is focusing on micropayments via the Internet of Things (IoT), smart contracts, conditional payments and international payments. The partnership with Nexuslab provides the bank the chance to collaborate with other blockchain initiatives.
Harrie Vollard, the bank’s head of innovation, said the approach will foster startups in a virtual setting. Nexuslab has launched a new way to enable blockchain innovation. The partnership will allow Rabobank to work directly with global early-stage ventures and support the growth of the European blockchain ecosystem.
Vollard said the fact that the bank has tested distributed ledger technology will further strengthen its expertise in the technology.
Daniel Grassinger, the co-founder of Nexussquared and managing director of Nexuslab, said the partnership, Nexuslab’s infrastructure and SwissQ, an IT partner, have developed an “unparalleled offering” for European blockchain startups to move their concepts and visions into viable businesses.
Nexuslab kicked off its first round last weekend with an in-person session in Amsterdam. Additional in-person sessions will take place in Berlin and London. The final session of the three-month program will be in Zurich.
Rabobank will also participate in the sessions in different European cities, with the last one in Zurich.
Featured image from Shutterstock.