Blockchain Is Hot, But Where’s the Beef?
In spite of the hype—news of blockchain developments and its associated Bitcoin currency has become nearly ubiquitous—large-scale enterprises have been slow to adopt the emerging technology that promises to disrupt and improve a wide range of industries from finance & banking, insurance and real estate to cybersecurity and even music.
Companies have played with it; they understand what blockchain does and how it works. Their innovation labs have participated in proof of concepts (POCs) and may belong to one or more industry consortiums created to vet the technology, but they haven’t taken the next step and implemented the technology for any mission critical apps.
What’s Holding Back Blockchain?
One of the fundamental issues holding blockchain or distributed ledger technology (DLT) back is the level of maturity of the technology, to wit, it’s current inability to support large-scale financial infrastructures by working in millisecond speeds. Currently the math, which is CPU-intensive can only support single digit to tens of transactions per second. It’s a bit of hurry up and wait!
The problem was highlighted in a recent article on Finextra, “Bank of Japan exec warns FS firms against leaving DLT expertise to tech providers,” 2MAR17. "There is absolutely no doubt that DLT is an unprecedented innovative technology,” said Bank of Japan executive director Shigehiro Kuwabara. “However, based on the level of its technology at this stage, it cannot be said to have yet reached the absolute superiority required to fully replace the current centralized system.”
However, consortiums like the Hyperledger are working on a new release of their open source code base that is supposed to support more than 1,000 transactions a second. What’s more, Hyperledger participant IBM’s new z Systems server platforms reportedly will be able to double that speed. Other developers like Ripple and Etherium are right behind; a lot of people are working on this.
Once the speed is there, which Oliphant thinks could be between the later half of 2017 and the first half of 2018, early adopters are expected to jump on it, followed by mass movement by the rest. “Blockchain needs to be mature first,” he said, “and we expect the rest to be fast-followers!”
ACI, which enables more than 5,000 processors and banks to transact $14 trillion daily through its suite of software-as-a-service tools, has been actively engaged with blockchain technology and POCs for the last two years. However it’s only been the last few months that its customers have started to step up to the blockchain plate.
We are just starting to see customers with requests for information (RFIs) and requests for proposals (RFPs). They want to engage with us and multiple blockchain providers. Our customers tend to have large payment infrastructures integrated to perform various payment functions and they are looking to ACI to help them integrate the technology with their existing payment systems. They want to move incrementally.
What Should Customers Do Now?
We recommend that customers identify critical business use cases where they can use the technology to bring business value and improvement to existing processes or create new products and services. A compelling use case will help drive the technology (much as Bitcoin did originally). That will also make it easier for their CIOs to fund it versus launching a blockchain initiative that is looking for a problem to solve. Customers should be laser-focused.
Fortunately, not all use cases require high velocity/high performance blockchains. That means that institutions can be supported by the technology today.
Some of the top current use cases that do not require millisecond transaction speeds are:
- Cross-border payments
- International remittances: replacing current mechanisms to send money between family members.
- Supply chain management
- Centralized Referable Records/Data
Several blockchain providers such as Chain Inc., IBM and Ripple are beginning to offer products/services in these areas. The important thing for customers is to identify use cases that would bring business value to them.
Conversely, high velocity use cases, including clearing and settlement, and stock trading, will have to wait a little longer until the technology is ready. But as discussed above, potential customers will likely not have much longer to wait.
Related Blog Posts
European Banks Have the Right Tools to Stay Ahead – But Will Big Tech Overtake?
Open banking and immediate payments have come a long way, according to the panellists who joined me during the ‘Open Banking in an Instant World’ session at EBAday in Stockholm recently. The building blocks are now falling into place through the introduction of national and regional schemes, open banking initiatives, regulations such as PSD2 and the acceptance and use of APIs.
Checkout Optimization Challenges: Top Tips for Online Merchants
As the current conference season draws to a close, it’s time to reflect on one of the key topics topping the agenda for many online merchants: checkout optimization.
How Banks and Acquirers Can Deliver on the Benefits of PSD2 SCA Exemptions and Differentiate Their Merchant Services
PSD2 is an opportunity for acquirers to differentiate themselves by delivering improved services to their merchants, if they implement modern solutions to manage SCA exemptions. This will drive the best customer experience in combination with regulatory compliance.
How UPI is Driving India's Shift from Cash to Digital Payments
The Indian economy has traditionally been heavily dominated by cash, while experiencing low adoption of various online payment systems including National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and inter-bank mobile payments. The dominance of cash is evidenced by the ratio of cash withdrawals at ATMs vs debit card usage at Point of Sale (POS)—ATM transaction volume is more than 2x greater than POS.
Cooperation, Consultation and Collaboration Are the Keys to Countering CNP Fraud in Australia
As Europe, and other parts of the world ramp up for regulatory changes around PSD2, Australia is about to launch its own strategy to combat Card Not Present (CNP) fraud.
PSD2 and Strong Customer Authentication – What's in Store for Merchants?
With the final pieces of the Payment Services Directive (PSD2) puzzle coming together, payments businesses are highly focused on meeting their compliance obligations. But the forthcoming changes will affect everyone in the payments chain – and it’s important for merchants and PSPs to understand the practical implications for their businesses and customer relationships.
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.
Success Speaks: Surprising New Ways Students Want to Pay
Colleges and universities are facing the dual tasks of accommodating not only new payment methods, but also a new generation of students, Gen Z, whose expectations differ greatly from even millennials. How can higher education institutions meet these demands?
In our latest Success Speaks webinar, experts from Temple University, FutureCast, ACI and MTFX Group of Companies explored today’s payments landscape for colleges and universities, payment desires of Gen Z, innovations the higher education sector is already implementing and how schools can better assist with international payments.
Women Must Choose to Rise Up Despite Past, Current and Future Circumstances
Money20/20, Europe’s biggest payments and fintech event, was recently held in Amsterdam and featured Rise Up Money20/20, a global program designed to address the gender imbalance in leadership positions within the financial services and fintech industries. A cohort of 30 female professionals was selected to take part in an exclusive curated agenda, complete with a series of bespoke content sessions, one-to-one mentoring and unique networking opportunities.
Beyond Borders: Navigating the Challenges of eCommerce Expansion
eCommerce continues to flourish, with impressive growth figures year after year. In 2018, global online sales reached almost $3 trillion, and are expected to hit $4 trillion by the end of 2020.
Despite eCommerce taking an increasing slice of the retail pie (which could now be as high as 15 percent according to recent figures), it is increasingly challenging, with competition and cost pressures creating significant issues for merchants of all sizes.