IBS Journal April 2017
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global banks to follow. “We see ICICI in India and RBL bank as reaping the benefits of the latest technologies they’ve installed too. Banks such as DBS in Singapore are also creating different business models to increase their reach and strengthen their position.”
If banks don’t rise to the challenge, there are many FinTechs waiting to nibble away at their business. For instance, Caxton is a company that uses hybrid blockchain and core banking-type technology for foreign exchange (FX) end uses. Its CTO, Russell Stather, is convinced that smart contracts and DLT will disrupt the commercial banking environment serving corporate treasurers. “Smart contracts allow you to move an asset with multiparty involvement in a single transaction, which makes it cheaper, quicker and traceable end-to- end,” he says.
The key benefit for a payment or trade finance end use is that not everyone in the chain is taking a transaction fee anymore, as blockchains – unlike correspondent banking ones – are fast, irrefutable and traceable.
Settlement mechanisms and structures for investment
banks could also easily be disrupted – or improved – by DLT, which is best defined as a distributed ledger that is secured by mathematical algorithms and provides a record of events shared by multiple parties. The ledger can be public, open source and available to all – as per the original Bitcoin (BTC) crypto-currency ledger, with its attendant cyber-security worries – or it can be a private ‘permissioned’ chain that enforces standards and vets and manages invited participants. The latter is more popular in banking, but reduces the full network benefits of the technology.
According to Conor Ogle, Vice President at Sapient Consulting experiments with emerging technologies like blockchain or AI “must be tethered directly to the core infrastructure and core purpose of a bank. If they are not, these initiatives can too easily mobilise activity around ‘the new’ without sustainably progressing the core viability of the enterprise.”
In other words, make the technology relevant and useful by finding end uses and make sure experiments have that goal in mind.
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