As far as banks are concerned, they're going full blockchain.
A survey conducted by professional services firm Accenture has revealed that nine out of 10 major U.S., Canadian and European banks are currently exploring blockchain technology in the field of payments.
The survey, titled ‘Blockchain Technology: How banks are building a real-time global payment network’ [PDF] canvassed the opinions of 32 of the top commercial banking professionals in the banking industry. Notably, the transformational potential of blockchain technology in the payments space was under the spotlight. Executives participating in the survey included those from 11 of the top 20 Canadian, European, and U.S. banks, by assets.
Notable takeaways from the survey reveal that 30% of those major banks are already involved in developing or undertaking proofs-of-concept of distributed ledger solutions for payments. A further 13% of the surveyed banks have engaged in implementing their blockchain-based products. 17% of the banks are at “the forefront of revolution”, according to the report, ostensibly meaning those solutions are already in use.
However, despite the inevitable wave of blockchain hysteria setting into the banking industry since 2015, some banks have been bamboozled with the hype.
One U.S. bank executive revealed that his bank was currently in its “learning mode” after being “bewildered” by the blockchain train.
A Canadian banking executive added “we don’t even have enough information to have an opinion”, indicating that the bank was still caught in the headlights.
Another Canadian bank executive, who had researched the use-case for the technology determined that the innovation wasn’t applicable for every payment transaction.
It’s not an option to replace every transaction, so we are working to create proofs-of-concepts and use cases to demonstrate value.
The most prevalent use-case explored for blockchain applicability by the banks is in intra-bank cross-border transfers.
Nearly half the banks are focusing on exploring or developing cross-border transfers between banks. Cross-border remittances are the second biggest use-case as determined by the banks. Person-to-person transfers, which sees commercial banking’s end-users and everyday folk using payments comes fifth in the leading avenues for banks’ application of bitcoin’s underlying technology.
Meanwhile, banks see lowered fictional and administrative costs as the biggest benefits of distributed ledger technology. Quicker settlement times and increased efficiency by lowering the number of errors follow after cost-cutting, while new revenue opportunities due to the technology are also piquing interest from banks. For instance, real-time data relays and synchronization could help create new financial services. Furthermore, reference data gathered among private blockchains deployed by banks and regulators could prove lucrative for sellers.
Most executives in the survey agree on one thing – whatever the solution deployed by banks, the network should not be an ‘exclusive club’
To further drive home the point, banking executives see a viable blockchain solution in the payments industry to be accessible by non-banking participants that would include Fintech firms and technology companies of the likes of Google and Apple, as revealed by the survey. Fundamentally, any corporation or participant involved in the supply chain.
One Canadian banking executive stated:
Ultimately, ubiquity is the most important thing from a payments perspective. We need to be able to pay anyone, anywhere. Sending payments between two banks has no value.
This common outlook could be the singular factor in its importance to refresh the banking industry’s infrastructure with blockchain technology.
Indeed, the most notable collective banking effort to explore and develop blockchain solutions in the financial industry is going open-source. While R3 remains a private consortium comprising of the biggest banks from around the world, the consortium’s jointly-developed distributed ledger software, Corda, will see its code contributed to the Hyperledger Project.
The survey comes soon after a similar effort from IBM’s own banking industry survey, which summed up the current blockchain endeavor by the banking industry:
Our survey of commercial and retail banks reveals that the industry is hurtling toward blockchain adoption faster than many expected.
The survey counted 200 banks as its participants and 15% of those banks revealed that they would be running blockchain-based solutions in 2017.
After the wild rush to develop blockchain solutions, standardizing the technology could be the banking industry’s biggest move in seeing blockchain adoption.
Images from Shutterstock and Accenture.