When an internet-based currency called Bitcoin emerged a few years ago, the idea of virtual money mostly triggered skepticism. However, the underlying technology, called Blockchain, may potentially change the world of banks and corporates altogether. We will demonstrate how the technology of tomorrow can be used in a productive way.
Multiple opportunities for application
Blockchains may revolutionize the banking business in the foreseeable future. Marketable solutions for commercial use in banking operations are not as easily discovered and put into operation as originally expected, but concepts for the integration of blockchain technology into day-to-day business are currently underway.
We began analyzing the potential of blockchain technology in advance: Starting with international payments and e-identification via the eID system and then moving on to account reconciliation, clearing and settlement procedures. We also see opportunities in the automatization of contracts smart contracts. As a member of the R3-consortium, we have recently developed two game-changing prototypes for smart contracts concerning the management of foreign exchange receivables and letters of credit.
Smart contracts – faster, cheaper, easier
These automated transactions are cheaper and faster, but most importantly easier to handle, not only because they make manual financial transfers obsolete, but also because they minimize negotiation needs. However, the applications are not limited to traditional trade financing. In the long run, escrow accounts could benefit from this new technology as well.
The key question therefore is not whether blockchain technology will conquer operational applications in the financial industry, but when and how we can apply it for our clients.
Collaboration is crucial
The advantages of blockchain technology can only be put into practice via standardization and mass adaptation. This requires increasing collaboration of financial institutions in forums such as the R3-consortium to ensure that the multitude of blockchains that are currently in the development stage can interact with each other.
The more that banks collaborate with other sectors in creating mainstream solutions for blockchains, the sooner we will see a break-through of this technology.
Success is only a question of time
CFOs and treasurers are especially interested in getting immediate information on business processes and optimizations of processes. For them, this technology could become more important in the next 12 to 24 months.
There is no doubt that blockchain technology will not disappear as quickly as other “cure-alls” of recent years. As its advantages become ever more evident, its final break-through is only a question of time.
The research organization Finextra recently published the paper “Banking on blockchain,” which analyses the current status of blockchains in the financial industry and shows the opportunities of the new technology for the banking sector.
future of trade?
Today, blockchain is considered the “next big thing”. What about tomorrow? Will this new technology have an impact on trade? Whatever happens, this trend will almost certainly lead to a new way of working. ING is positioned at the leading edge with the distributed ledger platform “Marco Polo”.
What does the development of digital currencies and transactions herald for financial institutions like ING? And how can it change the manner in which we do business? ING investigates whether blockchain, the technology behind the bitcoin for example, can be used for the settlement of complex transactions.
ING is one of the key drivers of the future of blockchain technology
ING has realised the potential of the blockchain technology at an early stage and began to explore its practical applications immediately. The R3 Consortium, which is a collaboration of the leading global financial institutes, also concentrates on achieving these targets. ING has been a member of the R3 Consortium since its foundation back in 2005.