Is Blockchain Ready?
SIBOS is just around the corner and blockchain will undoubtedly be one of the buzzwords at this year’s event (as is the case at pretty much every payments or fintech conference these days). The big question on everyone’s mind is whether blockchain really has the potential to change the global systems that process trillions of dollars in payments every day or whether it’s hype. I recently sat down with Paul Thomalla, ACI’s senior vice president of global corporate relations, to delve deeper into the topic, a topic on which he has just published a white paper.
Everyone seems to be talking about blockchain these days, but for many the concept still seems to be a mystery?
That’s right and one of our aims was to demystify the idea of a blockchain. Our white paper clearly defines what blockchain is and what it isn’t or can’t be. The research looks at some of the practical examples of how blockchain can be used by identifying what I call the ‘sweet spot’, i.e. use cases where an ideal combination of attributes of the technology come into place. The findings are based on our own research and conversations with 10 financial institutions all involved in their own blockchain projects.
What do you personally think is the potential of the blockchain technology?
There is a lot of noise around blockchain disrupting payments, but I believe the technology is NOT ready for application in payments in the near future, by which I mean in the next 3 to 5 years. It’s far away from getting into the regulatory environment and therefore will not be ready for public use in the near future. However, there was a general recognition among those with whom we spoke blockchain will have a transformative impact on the financial services industry. At the moment, it is a raw technology, and few see immediate gains, but they are nonetheless investing in assessing its value.
Which brings me to the ‘sweet spot’ – where did you find it?
I believe that there are some excellent use cases. Blockchain enables data to be shared, authenticated, audited and to be stored forever. The technology has the potential to transform areas such as supply chain and trade finance and especially securities post-trade. At the moment, the total cost to the finance industry of clearing, settling and managing the post-trade environment is estimated at between US$65 billion and $80 billion per year. The back office elements of much current post-trade activity are based on archaic and complex processes, many still lacking automation. The nature of this post-trade processing really plays to the blockchain’s ‘sweet spot,’ and use of the technology in that space will bring massive savings for financial institutions.
So what’s your advice to clients?
Everyone should be taking this technology seriously as it has the potential to disintermediate many of the processes we know in today’s financial services industry. But it won’t happen overnight or as quickly as some predict. What we need to change first is the culture in which we embed it; today we work in silos, the sheer nature of the blockchain technology is that it doesn’t work in silos.
Related Blog Posts
Deep Dive: Latin American Fintech Market (Part 2)
To support fintechs’ development and create a more inclusive financial system, governments across the Latin American region should adopt different regulations. Some good practices implemented in other countries, like the U.K. or Singapore, could also be adopted in Latin America, such as temporary exemptions on fintech authorizations on behalf of regulating entities, or the creation of temporary regulation sandboxes in which fintechs can operate, evaluate their business models and offer their innovative products in supervised environments.
Deep Dive: Latin American Fintech Market (Part 1)
There is a gap between what financial institutions currently offer versus what today´s customers want in Latin America, and this is where fintechs are earning a reputation for customer-centricity, personalization, quick response and seamless delivery. The relationship between fintechs and traditional financial institutions in Latin America has evolved from competition to collaboration, with the aim of efficiently working together and effectively scaling innovation, while also driving financial inclusion for the underbanked.
From API to AI to I: Banking Tech Gets Personal
Tired feet. Running out of business cards. Countless LinkedIn connections – sound familiar? This time of the year is conference season; the annual SIBOS (SWIFT) and Money20/20 USA gatherings spanning the autumn give attendees plenty of hot topics and talking points. My American colleagues refer to this season as “the fall.” I trust this to be an observation on leaves and fruit rather than a sequitur on the state of the fintech industry. Either way, it’s a good time to harvest, to take stock and to work out what we should be doing with the apparent abundance of innovative produce.
How to Maximize the Value of Partnerships Between Fintechs and FIs
The LATAM Open Banking & Fintech Partnership, organized by Connect Global Group, was held earlier this year in Mexico City, and ACI participated as one of the forum partners driving discussions on how to maximize value from collaborative partnerships between FIs and Fintechs. We explored the invaluable benefits of open API and strategies to differentiate the offerings of FIs and Fintechs, address consumer demands, and best practices for implementation aligned to regulatory requirements.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 2)
While the sheer volume and age of potential shoppers makes México an attractive market, there is another component to the viability of eCommerce: México is mobile. A recent study performed by the Asociación de Internet.mx, shows that México is one of 22 countries leading the trend toward mobile commerce, with young adults making 88 percent of smartphone purchases. The country has one of the largest mobile markets in Latin America, with one-third of all residents using smartphones.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 1)
The population of México is the second largest in Latin America, with 122 million residents, 39 percent of whom are considered middle-class. The population is relatively young, with an average age of just 27, and one-third estimated to be millennials, which is often a factor in driving the popularity of eCommerce. Last year, 56 million people accessed the internet in México, though despite the high number of internet and mobile phone users in the country, nearly two-thirds of the population do not have bank accounts (source: Banco de Mexico).
How to be a Payments Trailblazer – The Seven Habits of Highly Innovative Organizations
The new Culture of Innovation Index from Ovum and ACI identified segments—from banks to intermediaries to merchants to corporates—at the cutting edge (of innovation) across the payments ecosystem. But what is most notable about those segments that have reached ‘trailblazing’ status is the apparent lack of commonality between them. No one segment, nor one region fosters better innovation. In fact, what’s driving these segments/organizations to be best of breed is their own culture of excellence. The only thing they have in common is their attitude.
Customer Innovation: Erste Bank [Q&A]
The global banking sector is becoming both more strategically focused and technologically advanced, responding to rising consumer expectations while trying to defend market share against an increasing array of competitors. A great deal of emphasis is being placed on digitizing core business processes, and reassessing organizational structures and internal talent to be better prepared for the future of banking.
Regulating for Real-Time: The Role of Government in Payments Modernization
Dr. Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments and the findings of the new white paper, Get More from Real-Time.
Issuing and Acquiring in a Real-Time and Open Payments Ecosystem – The Global Picture
Dr Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments, stemming from the findings of the new white paper, Get More from Real-Time. See part one.