How are banks and start-ups pushing forth their blockchain strategy?
Organisations across industries are in momentum to fully integrate blockchain technologies into its operations because of the benefits it brings. This is particularly seen within the financial sector as it continues to innovate the ways in providing value-added services to its customers. As businesses break through geographical barriers and are more connected than ever, there is much opportunity for banks to work collaboratively with fintech and blockchain start-ups who are ahead of the game.
The government, along with Monetary Authority of Singapore (MAS), are looking to boost blockchain development in an effort to improve financial inclusion. Thus, Singapore is en route to develop itself as a blockchain hub within the Asia-Pacific region by being at the forefront of this technology.
Below are some examples of how local leading banks as well as start-ups are riding on the trend of blockchain.
In December 2017, Citi and CME Group revealed the implementation of a blockchain-inspired payments platform to cut costs associated with back-office operations. Both financial giants expect to achieve greater levels of efficiency using the system, which enables real-time monitoring.
This innovative solution is immediately scalable across any financial institution to deliver sizeable operational and cost efficiencies.
J.P. Morgan has been extremely active within the blockchain ecosystem, where it runs a Blockchain Center of Excellence (BCOE). The center takes the lead for efforts on applications of distributed ledger technology (DLT) within J.P. Morgan. The bank commits to explore blockchain uses and would continue to innovate solutions across its business.
The Quorum platform, which runs on the Ethereum (ETH) blockchain is one of the innovations by the bank, modelled after cryptocurrencies like Ethereum. Currently, Quorum is used by pharmaceutical companies Pfizer and Genentech as well as Microsoft Azure, amongst others.
Reported by Bloomberg in March 2018, J.P. Morgan is considering making Quorum which is currently its blockchain and smart contracts platform, into its very own company because of the success that it’s receiving. This would mean a greater establishment of Quorum, instead of purely a platform.
Blockchain strategies and focus differ when it comes to start-ups within the financial sector. Below are some of the start-ups that are establishing themselves within the field of blockchain that organisations should keep an eye out for.
Alipay & Ant Financial
Alibaba's payments affiliate Ant Financial aims to acquire 2 billion customers in 10 years. To prepare for that, the Chinese giant is exploring further uses of the blockchain technology.
Reported by CNBC, Ant Financial is in talks of ramping up the use of artificial intelligence and blockchain – creating a distributed ledger system that experts have said could make many financial processes cheaper and quicker.
Alipay, part of the Ant Financial Services Group is also recruiting blockchain experts to look actively into the other potential that blockchain technology has.
The Group’s blockchain efforts have also been extended to provide better data across Alibaba’s e-commerce supply chain.
Ripple, which sees South-east Asia as a priority market with pressing remittance demands, is one of the few firms that have held early talks with MAS for its technology. This is in hopes to be part of the MAS's blockchain experiment in cross-border payments said CEO of Ripple, Brad Garlinghouse, in an interview with The Business Times.
Ripple offers blockchain technology to banks that are looking to speed up cross-border payments from days to seconds. The process of sending cross-border payments has been described as a black hole, as banks for years have been unable to efficiently track transactions and their fees which have typically been passed on to both corporate and retail customers.
Is there a possible collaboration between blockchain start-ups and banks?
While blockchain start-ups continue to innovate the ways in which they can provide new value-added services to customers, banks need to embrace these technologies that would ultimately change their traditional operations.
Collaborations with these start-ups is a viable option that can benefit both parties in the race to become Asia’s blockchain hub. Ripple takes the lead for this as the start-up in Singapore has more than 10 of the world's top banks as customers. The company is also planning to double its 100-strong network by the end of this year, adding that its services will appeal to banks who are fretting over competition from technological giants.
Ultimately, blockchain technologies not only encourages the collaborative environment within the banking and financial services sector, but it also allows organisations to identify and hence anticipate clients' needs better. As customer-centricity becomes a top priority moving forward, blockchain would potentially be a monumental strategy that can help monitor and address risks more efficiently.
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