The List of Banks Using Blockchain Technology May Be Short, but the Future Is Still Bright
Given how blockchain technology has far reaching applications in the financial services sector, the author, Aubrey Hansen, discusses the technology’s adoption by banks.
Despite the furor surrounding blockchain technology over the past few years, it would appear that not everyone is climbing aboard the hype train just yet.
Granted, we’ve seen some significant interest from some of finance’s major players, with the likes of Mastercard and IBM heralding the technology as the answer to being able to move money around the globe with fewer issues and faster, but not everyone seems sold on the idea.
One such company is TransferWise, the London-based startup that currently transfers money between over 70 countries at the time of writing and who boasts a reduction in bank fees and savings of up to eight times that which you would spend with a bank.
Co-Founder and Chairman of TransferWise, Taavet Hinrikus, believes he hasn’t seen a benefit from the technology yet.
A Lot Harder Than It Looks
Speaking on an episode of Fortune’s Balancing the Ledger, he said that
“we’ve heard this dream many times from different people. However if you start digging into it, you realize that it may look great on paper, but in reality, to make use of it, it’s really hard.”
A considerable part of the issue with blockchain technology at the moment is that there hasn’t been enough uptake from institutional banks to make the use of the technology more efficient than current payment systems.
Hinrikus at TransferWise raises a point about the Ripple Network, a startup that uses blockchain technology to facilitate cross-border payments between banks in an almost instantaneous fashion.
“If every bank in the world was going through the Ripple network, it would be amazing. Yet how many banks are using Ripple today in production? It’s a very short list.”
He’s right, of course, but while Ripple may not be in use exclusively throughout the financial world, it’s certainly not wasting any time in expanding its network.
Only this month it added the 5th-largest Southeast Asian bank to its ranks, as Malaysia’s CIMB group entered the fold.
xCurrent Is in Demand, XRP Not So Much
CIMB, long considered to be on the front line of technological advancement, is one of the forerunners in the Southeast Asian market to seriously look into adopting blockchain technology to enable faster and easier payment systems.
This news comes a few months after Ripple announced that one of the top ten US banks, PNC, would be utilizing their technology for international payments.
Of course, many know Ripple as the company behind the third largest cryptocurrency by market capitalization, XRP, but they may be disappointed to learn that in the deal struck with PNC there is no mention of the cryptocurrency.
Asheesh Birla, senior vice president for product management at Ripple commented in an interview that while the use of the distributed ledger protocol known as the xCurrent platform is appealing to those within the traditional finance world, the use of XRP is still some way off.
Birla believes that having companies adopt xCurrent is a significant step in the right direction as far as XRP use goes -
“It’s a way [for banks] to get their toe into the water” with the primary goal of the company being “how do you get [banks] to use xRapid which is our liquidity product.”
At the time of writing, Ripple has also signed Santander as well as the aforementioned PNC, but the vast majority of its banking portfolio is comprised of Asian customers.
Crypto Instability Isn’t Helping Case for Adoption
It’s widely accepted that convincing traditional finance to adopt blockchain technology, let alone cryptocurrency, is going to be an uphill battle of sorts, which has no doubt been exacerbated by the recent volatility in the crypto market following the Bitcoin Cash fork.
While the likes of Ripple continue down the path they’re on, we’ve seen some startups decide to move in a different direction altogether, where they don’t have to convince the current banking mainstays that crypto and blockchain is the way forward.
EQIBank has decided to use actions rather than words, and with lofty aims of redefining the entire banking sector, they’re certainly making waves ahead of their customer account launch next month.
With a business model that incorporates fiat as well as both crypto and digital assets into one fully regulated ecosystem, they’re certainly taking a bold step.
Can they succeed? Will they be able to take advantage of the hesitancy that the banking industry is showing, an industry that is well known for its reluctance to incorporate fresh technologies and ways of doing things into what it believes is a tried and tested system?
Time will tell, but speaking ahead of the official launch of EQIBank in October, CEO Jason Blick made clear that he is a firm believer that the banking system as we know it cannot continue as it is.
"Banking is broken. We hear this consistently throughout the market - whether we're talking to high net worth individuals or financial institutions.
“People want to invest in new, emerging asset classes, but they can't because the industry simply hasn't evolved to make it possible. The process is too complex, too expensive and too insecure.
“We launched EQIBank to solve these problems, redefining the boundaries of banking.”
Like it or not, it would appear that the banking industry is due a bit of a makeover, and emerging tech companies are leading the way in making it happen.