Is Blockchain Ready?
Friday, September 23, 2016
Posted by Katrin Boettger to Payments and Industry Trends, Immediate Payments, Transaction Banking
Share this:
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
Positioning PSPs for Success in 2020: Scalability, Flexibility and Globality
We used to say that NFRs (non-functional requirements) such as scalability and availability didn’t really make for attention-grabbing headlines, but in fact, 2019 has shown us that these NFRs are often not far away from the biggest stories. A major outage or downtime – be it for bank or merchant – makes headlines in its own right, but we’re increasingly seeing a clear link between NFRs and a company’s growth trajectory. Those companies that are generating positive awareness from their ambitious global expansion plans, innovative customer experiences, or unique approach to fighting fraud – they are achieving this off the back of technology solutions that deliver world-class non-functional requirements. Scalability, flexibility and globality underpin these growth stories – and this message comes out clearly in speaking with some of our leading payment service providers (PSPs), which are supporting the growth of thousands of merchants around the world.
Three Merchant Payment Trends to Watch in 2020
In 2019, merchants everywhere were challenged by pressure from new entrants, the continued breakdown of traditional industry boundaries and growing customer preference for a digitally-led or digitally-influenced purchasing experience.
Learn How to Claim a Greater Slice of the Mobile Payments Pie
U.S. Wireless Players: $14.3B is at stake – are you in?
Mobile commerce is thriving as consumers seek out convenient, quick and secure shopping experiences. And transaction growth on mobile devices is outpacing traditional desktop and in-store channels, aided by click and collect and one-click purchasing trends. For U.S. telcos, the message is clear: proactively add value to the payments process, or risk missing out on increasing your portion of the growing mobile payments market.
How to Survive Black Friday and Cyber Monday… and Provide a Great Consumer Experience
As Black Friday and Cyber Monday approach, shoppers and merchants alike await amazing deals and a welcome boost in sales, respectively. I took a moment to speak with two of ACI’s merchant payments and fraud experts, Andrew Marshman (merchant payments lead, Europe) and Erika Dietrich (VP, Global Fraud Prevention Risk Services) about what merchants need to know as they head forth into one of the biggest shopping seasons of the year.
Merchants: Digital Presence and Strategy are Key to Success in Today’s Competitive Environment
Over the last decade, merchants across all sectors have gone through a metamorphosis of sorts, with new online merchants emerging and often growing fast and furiously, while many larger, physical anchor stores struggle to remain relevant in the face of digital displacement. Now more than ever, merchants need to innovate to stay relevant to their customers in a fiercely competitive landscape with constantly changing channel and buying desires.
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.
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.
Get Customers to Race Through Your Payments Funnel
No matter how good the products, how nice the website and how slick the flow, there are so many reasons why an eager prospective customer does not convert into a paying customer even after they have filled their basket. The buying decision has been made, but so often customers don’t complete the transaction.
Helping Merchants Protect Themselves: Cybersecurity Tips from a Former White House CIO
In a world full of open technology, the devices that make our lives easier also leave us vulnerable to being hacked, according to Theresa Payton, former White House CIO and star of the CBS series Hunted. Payton recently joined me for an exclusive ACI cybersecurity webinar, sharing expert insights into how merchants can enable growth, enhance the customer experience and prevent greater instances of fraud.
Transforming Telecom Companies in a Retail World
The recent MVNO World Congress in Amsterdam brought fascinating insights into the changing telecom industry, particularly around the opportunities that lie ahead for Mobile Virtual Network Operators (MVNOs) and how they can they can cement their position in today’s fast-paced climate.