Banks And The Blockchain Scramble

Banks seem smitten by blockchain. Seems everyone is getting into the act. Traditional banks, especially, and central banks, too.

But might the more enthusiastic adopters be getting a bit ahead of themselves?

First, some numbers and some observations, general ones, and then winnowed down through the financial sector.

PwC writes in its “Global Blockchain Survey 2018” that responses from 600 executives across 15 territories are embracing distributed ledger technology (DLT) with enthusiasm. Of those queried, as many as 84 percent of firms are involved with DLT.

“Companies have dabbled in the lab,” wrote PwC. “Perhaps they’ve built proofs of concept. Everyone is talking about blockchain and no one wants to be left behind.”

The firm noted that Gartner sees blockchain will help generate annual business values of $3 trillion within 12 years – and beyond that, as much as 20 percent of global economic infrastructure.

Thus, 25 percent of the respondents have run a live blockchain implementation. And against that broad backdrop, sanguine as it is, a number of initiatives have bowed via banks.

Among the most recent: The World Bank said that it has launched the first bond on a blockchain with the Commonwealth Bank of Australia – the first bond to be created and transferred across seven investors in the blockchain, which include First State Super, Northern Trust and others.

And in other new launches, per Bloomberg, banks in Kenya are looking to get regulatory approval to use DLT to boost payments and help with credit scoring.

Samsung? In the act, too, as the Samsung SDS unit has bowed a blockchain-based certification platform for South Korean banks. The initiative is tied to the Korea Federation of Banks, and through a new platform known as BankSign, the goal is to smooth cross interactions between mobile platforms and transactions. Reports have stated that users can use different apps, but need to verify themselves only through one app.

Some Other Data Points

Ah, but amid the breathless coverage, a few wrinkles emerge. Interesting data point from PwC: 45 percent of respondents think trust could delay implementation, and slightly more than that percentage see regulatory concerns as a roadblock to blockchain adoption. Another 28 percent say that interoperability of systems is key.

Thus the news of patents from the likes of, say, Bank of America and others may seem a bit like reserving a seat at a table, but not showing up at the restaurant.

And consider the fact that Kenya – where credit scoring can lead to financial inclusion – noted that in its own statement on the initiative, such technology needs to make sure that “controls are in place” tied to the risk of emerging technologies. Then again, the same article that discusses the emerging technologies also notes that banks have seen falling demand in lending – which comes in tandem with political uncertainty, growing bad debts and caps on interest rates. The methods of getting loans to borrowers may change (with blockchain), but might we surmise with those constraints in place, issues beyond conduit are stymieing lending itself?

In other news that shows reluctance to sign on even when DLT seems a bit ready, sites such as bitcoin.com noted that CLS Group – an FX settlement service provider to firms spanning Goldman, JPMorgan and others – “has been forced to ‘water down’ a blockchain project two years in development due to banks’ reluctance to participate.” The project was almost two years in the making, with half of the backing banks actually coming on board, in light of the scope and massive undertaking of integrating with blockchain.

In the end, perhaps when it comes to banking and blockchain, waves and ripples make a sea change, and rarely are tidal waves really in the offing.