“Today is the slowest day of the rest of your life,” commented a keynote speaker at last year’s EuroFinance conference in Vienna. That pretty much summed up the ever-changing world in which we live. Everything moves faster, transacts swifter, executes more rapidly than ever before. And the faster we become, the more speed we crave – in any sphere of activity. We are impatient, demanding and expectant when it comes to the technology that is supposed to help shape our very lives.
Ask anyone operating in financial markets and they will tell you that crises happen and unfold at a frightening speed – often too fast for anyone to be able to react or mitigate risks. All-pervasive mass media and international access to news 24 hours a day means that as an incident takes place, it is immediately being beamed around the world.
If anything can begin to keep pace with our insatiable appetite for speed and efficiency, it is surely blockchain and distributed ledger technology (DLT). We are now shifting from talking about these ground-breaking technologies in the future tense to accepting that they have arrived and are contributing to real-life scenarios. In 2017, we will undoubtedly see significant breakthroughs in areas such as cross-border payments, as we strive to leverage these technologies that will dramatically improve our capabilities and the services we offer our clients.
The historic correspondent banking model for international payments, whereby the beneficiary only receives payment several days after the payer has sent the money – with no predictability around when the payment will reach the beneficiary, how much will be received or the fees that will be incurred – is becoming increasingly burdensome, as client expectations around speed and transparency continue to grow. Nowhere is this more evident than in the low-value payment segment, where individuals and businesses are now used to instantaneous service.
But DLT is not only the property of ‘trendy’ fintechs.
Increasingly, banks are realising they need to incorporate a DLT strategy into their overall digital initiatives. Investments are being made and resources devoted to the cause.
At Earthport, we recently helped a major UK bank develop a DLT/blockchain-powered infrastructure that allows its app users to make international payments – a first for a UK bank and evidence of a real-world application of DLT.
We envisage DLT will gather momentum in 2017 and beyond – it is going to revolutionise financial services.
More specifically, we foresee that in the coming 12 months there may be something of an amicable divorce between blockchain and DLT, with the latter becoming more embedded in the lingua franca of the next digital revolution.
It is the technology that we need to take cross-border payments to a new level, allowing volumes to grow exponentially, move more quickly and provide customers with a better all-round and more transparent user experience.
DLT can serve to support the centralised clearing and settlement activities across geographies and markets, replacing the tired, cumbersome, unreliable and inefficient system of regional correspondent banking and enhancing all sides of each transaction.
This market is ripe for change and DLT surely has the potential to be the catalyst of our times.