Whine and Dime #0011

Whine

"The blockchain doesn't matter."

Shine

"The blockchain is the future of finance."

Industry News

There has to be something going on with blockchain technology when you start to get massively polarised views on what it is, and what it isn't. CapGemini think that it is a fundamental shift for financial services institutions. Simon Taylor, Vice President for Entrepreneurial Partnerships at Barclays, presenting at the first public meeting of Whitechapel Think Tank, thinks that blockchain tech will have a big impact on reconciliation, premissioning, and privacy. And a whole bunch of other banks have similar perspectives. Even the Bank for International Settlements has a view. Almost everyone thinks there's something deep going on.

Well, almost everyone. Constellation Research's Steve Wilson is more bearish, particularly with respect to the use of blockchain tech for identity. Skepticism is warranted when a proposition is little more than "add blockchain to X" (particularly when "X" is "identity"). However, there are some blockchain startups solving real problems. And add to this the focus on blockchain tech from Tier-1 global banks. There is an awful lot of activity in this space at the moment.

In contrast, Duena Blomstrom thinks that blockchain doesn't matter. Whilst her comments on the primacy of cultural transformation are fundamental to banks dealing with their manifest issues, she also goes on to say that "technology in itself does not matter". This is at the very least arguable, given that technology is one of the defining traits of humanity. "Culture" and "communications" are both "technologies" invented by humans, albeit emergent phenomenon. Given that, the advice to pay particular attention to the cultural and emotional impact of technology is well made.

McKinsey also has some insights onto disruption in payments: "How the payments industry is being disrupted". An interesting insight here is that "transaction-related revenues" (directly linked to transactions) will grow more quickly than "liquidity revenues" (derived from outstanding transaction account balances), at least in part reflecting how the move to mobile will increase the total number of payments transactions executed. The report also calls out 'non-bank digital entrants' as a source of disruption, modernisation of domestic payments infrastructure (eg NPP in Australia), inefficiencies in cross-border payments as an opportunity for new players, and how the digitisation of retail banking will spread beyond payments into transaction banking. Great detail, and well worth a read.

Why is Visa Europe testing remittances on the Bitcoin blockchain? Visa's Jon Downing said it was the need to identify a "human use case" with potential global value that led the project to focus on the remittance industry. This strategy appears to be a common theme as larger institutions test the water with blockchain technology. This is also a good point: "... bitcoin offers a creative solution to the 'last-mile' problem, in which it is argued the majority of remittance costs come in the form of physical kiosks that deliver hard currency."

Continuing Samsung's storied tradition of emulating the work of others, they are now taking a leaf out of Wells Fargo's payments marketing playbook, giving shoppers a $50 Best Buy gift card if they activate Samsung Pay on their phones. It's an idea worth emulating because of the power of defaults.

As much as we like to think that startups can and will disrupt the banking industry, it's sobering to look at just how difficult bureaucracy and entrenched thinking can make that task. Just having technology, or even money, is not enough, you also have the crack through the molasses of regulation and incumbency. Even seasoned entrepreneurs like Brewster Kahle have had so much trouble that he has decided to call it quits on the Internet Archive Credit Union. There are certainly some lessons here for upstart banks. Perhaps, rather than fight head on, it makes more sense to join up with the established players? Or more likely, there is a role for both: one to foster ideas, and the other to supply the kind of capital needed to operate a bank.

And in a move that has the potential to confound the rollout of Australia's NPP, PayPal shoppers will soon be able to make real-time, point-of-sale payments via the Eftpos network. PayPal will be integrating with Eftpos's new payments hub to make this happen.

Blog Posts

Worth Following

  • @sytaylor - Vice President for Entrepreneurial Partnerships at Barclays
  • @duenablomstrom - blogger, VC, consultant, creating "emotionally connected customers"

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