For Payments Infrastructure, Still Some Blockchain Buzz

1. August 2018.








Blockchain, blockchain everywhere.

Reports came this week that the much-touted distributed ledger technology (DLT) may be less savior for all manner of problems across the business landscape than thought.

Bloomberg noted, for example, that there may be a slowdown looming in terms of projects that may actually see the light of day.

Ah, but. Concerns of a slowdown overall? That does not mean, of course, that DLT is not in sight for some deployment across payments architecture. The proof will be in the proverbial pudding, as among other initiatives, the Bank of England (BoE) is in the midst of planning blockchain to be part of its payments system, in an effort that will bolster real-time gross settlements systems and help defend against cyberattacks. The settlement system facilitates transactions worth 500 billion pounds annually, and the bank will work with firms to integrate blockchain functionality.

By using blockchain, the impetus is to make sure that data cannot be altered. One other recommendation, as noted by BoE, is that firms should be able to use the system more directly, opening the door for smaller companies to participate in settlements – of increasing importance as all stakeholders see better visibility and speed when it comes to interbank cross-border payments.

Also with an eye on blockchain, and on FX and settlement, CLS has said it is in the end stages of testing blockchain payments for banks. The company has linked up with IBM to bring blockchain to payment netting activities, with a focus on standardizing activity in global FX markets. IBM is in the midst of bringing a blockchain app store into existence that would let FIs save on back-office processes, according to CNN Money.

Through LedgerConnect, infrastructure gets streamlined, which means that firms need not operate individual systems for, say, trading, where Goldman Sachs estimated two years ago that 10 percent of trades have mistakes that cost as much as $12 billion annually. Amid the early participants, which give access to seven blockchain vendors, are Citi and Barclays.

The service is slated for a summer launch, with seven banks in sight to sign on through the initial months. Standardization should help reduce costs, the companies have said, as manual tasks are reduced. Amid the initiative, CLS will offer members options to connect to SWIFT, either directly or via intermediary. Yet in a nod to some scaling back, the seven banks that are onboard are about half of what had been expected initially, amid what CLS Chief Strategy and Development Officer Alan Marquard has termed some caution toward the project.

Some Equity Investments, Too

In reference to individual investments, but also on the cross-border landscape, TransferMate has garnered a €21 million investment from ING. That funding gives ING a minority equity stake in the payments firm, and as reported, TransferMate will also give international payment services to ING’s small and mid-sized corporate client roster. TransferMate said it has facilitated $10 billion in international B2B payments since a 2009 launch.

The recent investment values TransferMate at about 350 million euros, and follows a transaction last year with Allied Irish Banks (AIB) that stood at 30 million euros. Under the terms of that partnership, the goal has been to give international B2B payments services to Irish firms. The Independent noted that the ING deal values TransferMate 18 percent higher than had been seen at the time of the AIB announcement. The deal is slated to close in the third quarter, and total funding to date now comes to 51 million euros.


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