This year saw several blockchain-based solutions from banks go live. Will 2018 be the year that blockchain lives up to its full potential?

Blockchain has been around for some time now. However, despite lots of talk, there are yet to be any large-scale commercialised blockchain-based products launched by banks that treasurers can leverage.

Whilst this lack of useable products may be frustrating for treasury professionals, it is interesting to note that banks are continuing to invest significant sums into the technology.

It can also be easy to forget the variety of small-scale blockchain trails and proof of concepts (PoC) that have gone live this year. Notable examples include:

• ANZ and Westpac’s bank guarantees blockchain-based solution which uses the technology to eliminate the need for current paper-based bank guarantee documents, resulting in a single source of information with reduced potential for fraud and increased efficiency.
• SWIFT’s gpi blockchain PoC which aims to help banks overcome significant challenges in monitoring and managing their international nostro accounts, driving efficiency in cross-border payments space.
• YES Bank’s multi-nodal blockchain transaction that helped its client, Bajaj Electricals, digitise its vendor financing.
• The first government crypto-bonds from the Queensland Treasury Corporation in cooperation with the Commonwealth Bank of Australia.
• Citi’s launch of Citi Connect for blockchain and its practical application with NASDAQ.
• J.P. Morgan’s deployment of a blockchain correspondent bank network in partnership with ANZ and RCB that also looks to minimise friction in the global payments process.

Cross-border application

The latest, but certainly not the last, announcement of a blockchain-based commercial banking solution comes from Standard Chartered and Axis Bank. Together, they have launched a real-time cross-border payment service for corporates using Ripple’s distributed ledger technology solution.

Shirish Wadivkar, Global head, Correspondent Banking Products, Transaction Banking, Standard Chartered explains that the solution is available for cross-border payments between Standard Chartered Bank Singapore and Axis Bank India, and, accessible through Standard Chartered’s corporate digital banking platform.

The benefits of the solution, according to Wadivkar include full visibility and transparency of payments accompanied by rich data. “This will give corporates certainty over what they are paying to make the payment and any associated FX fees,” he says. The solution also provides certainty as each transaction is 100% pre-validated.

Wadivkar notes that the solution is also real-time using the blockchain. “We are also expecting that the total cost of ownership would be lower, given that there is increased transparency and when the RippleNet network builds out we will have enhanced real-time reach with high automation and low reconciliation costs,” he adds.

More to come…

The next step for these projects is full-scale commercialisation. However, there remains some way to go before this can happen. Various impediments include regulatory issues, legal issues, as well as technological issues and cost factors.

As a result, exactly where and how blockchain will be used remains to be seen. An educated guess would be that trade finance will be first, with payments to follow soon after. The impact this will have on treasury and how soon they feel this impact also remains up for debate. Watch this space.