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Which Major Banks Have Adopted or Are Adopting the Blockchain?

Rebecca Campbell 27 November, 2017 (6 min read)

Since the blockchain first appeared, industries have realized its potential to transform services. One in particular is the banking or fintech sector, which is paying close attention to its development. But which major banks have adopted or are thinking about adopting Blockchain technology?

Around the world, financial establishments have been conducting tests with the distributed ledger, undertaking proofs of concepts and publishing their results. Blockchain consortiums such as R3 and the Hyperledger Project are also seeing a growing number of banks joining them so that they can work better together, both of which have over 100 different members. Ripple’s blockchain-based platform is another avenue which is seeing an increasing number of banks joining its global network as well. Last month, Ripple announced that over 100 financial establishments had joined its RippleNet network to modernise global payments.

According to technology company IBM, the rate at which banks are adopting the blockchain is ‘far faster’ than originally thought. It found that 15 percent of the 200 global banks surveyed intended to roll out, full-scale, commercial blockchain products in 2017. Interestingly, it found that medium to large institutions, with more than 100,000 employees, were leading the charge. A further 65 percent are expected to have blockchain projects in production within the next three years. As the report states, 2017 appears to be the year when banking on the blockchain ‘shifts from zero to sixty.’

The report said:

“Our survey of commercial and retail banks reveals that the industry is hurtling toward blockchain adoption far faster than many expected.”

The areas ripe for blockchain intervention include timely clearing and settlement of cross-border payments and remittances, fraud and error reduction, lower administrative costs, trade finance, identity, the removal of paper trails, and syndicated loans.

So which major banks have adopted or are starting to adopt the blockchain technology?

Goldman Sachs

As one of the leading U.S. investment banking institutions, Goldman Sachs set up a microsite explaining the benefits of the blockchain technology in the summer. One of the key features from the comprehensive site is the technology’s security: it provides a simple, secure way to establish trust for virtually any kind of transaction, helping simplify the movement of money, products or sensitive information worldwide. In its continual drive to help advance the developments of the blockchain, Goldman Sachs has been involved in a number of blockchain technology-based companies. These include the likes of blockchain-based payments startup Circle Internet Financial and blockchain-based startup Digital Asset Holdings. Last February, the Wall Street bank join Digital Asset Holdings funding round, helping to push the amount raised above $60 million.

Microsoft and Bank of America Merrill Lynch

These two organisations are working together on a project to use the blockchain to make trade finance transactions faster, cheaper, safer and more transparent. Currently, trade finance processes are costly and time-consuming, with the existing process typically taking between seven and 10 days to complete; however, with the blockchain they can be digitised and automated, shortening transaction settlement times. Microsoft’s Azure Blockchain-as-a-Service will be used for the project.

R3, Barclays, HSBC, and Co.

Fintech firm R3 has announced that it and 22 of the world’s biggest banks have created an international payments system based on the blockchain. A prototype of the solution is expected to be out by the end of the year. The banks involved include Barclays, BBVA, CIBC, Commerzbank, DNB, HSBC, Intesa, KBC, KB Kookmin Bank, KEB Hana Bank, Natixis, Shinhan Bank, TD Bank, US Bank, and Woori Bank. According to the R3 release, the aim is to deliver a safe and secure way to speed international payments and improve cross-border business.

Royal Bank of Canada

In a bid to aid the transfer of payments between its U.S. and Canadian banks, the Royal Bank of Canada (RBC) is experimenting with the blockchain. Martin Wildberger, RBC’s executive vice president for innovation and technology, explained in September that the use of the technology would improve the speed of payments, reduce complexity and lower costs. Previously, the RBC had said that it was against using the blockchain for its interbank payment system, stating that ‘too many hurdles’ needed to be overcome first.

JPMorgan, Royal Bank of Canada and Australia and New Zealand Banking Group

Despite the fact that Jamie Dimon, JPMorgan Chase CEO, is against bitcoin, the Wall Street banker sees the advantages that the blockchain can deliver. So much so, that JPMorgan has teamed up with RBC and the Australia and New Zealand Banking Group to launch a new initiative, known as the Interbank Information Network (IIN). Developed by JPMorgan, the technology will be powered by Quorum, a variant of the Ethereum blockchain, to allow secure data sharing. In the near future other banks are expected to join the network. On a daily basis JPMorgan processes $5 trillion for its clients across over 100 countries. IIN is expected to enhance customer experience, decrease the amount of time - from weeks to hours - and the costs involved with payment delays.

Fujitsu and Three of Japan’s Largest Banks

Japanese multinational IT provider Fujitsu is to begin working with [three of Japan’s major banks in January 2018])(http://www.bankingtech.com/1024532/fujitsu-to-trial-blockchain-payments-with-three-japanese-banks) to undertake a blockchain test. The banks involved are Mizuho Financial Group, Sumitomo Mitsui Financial Group (SMFG) and Mitsubishi UFJ Financial Group (MUFG). Lasting for three months, the test will involve the trial of a person-to-person (P2P) money transfer service using the technology. The IT provider will be creating a cloud-based blockchain platform for money transfers between individuals that can also be used by the three banks. Over the three-month period, the trial will determine whether the platform can ‘accurately and securely’ handle processes and clearing and settlement.

State Bank of India and BankChain

India’s largest bank, the State Bank of India (SBI), has revealed that it is working toward introducing a safer banking system in India through the blockchain. It intends to do this with BankChain, a community of banks in India and American multinational technology company Intel. SBI is the founding member of BankChain, which has 27 members in India and the Middle East. It’s hoped that the blockchain solution will enable SBI to increase the efficiency of transactions without compromising on data and transaction security. Primechain Technologies, which operates BankChain, will deliver the blockchain solution. It will run the Hyperledger Sawtooth and Intel Software Guard Extensions (Intel SGX).

Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore

Singapore’s central bank and financial regulator along with the Association of Banks in Singapore revealed in October that they had a new set of blockchain prototypes for decentralised inter-bank payment and settlements. They form the second part of Project Ubin, which is a collaborative project with the industry to explore the blockchain for the clearing and settlement of payments and securities. A report of the project and the prototypes are expected to be published during the Singapore FinTech Festival, held on the 13 to 17 November.

Over 40 central banks including France, Germany, Hong Kong and Sweden

According to a report published in January 2019, there are over 40 central banks considering using blockchain technology in various iterations. While research and innovation with blockchain technology have been under way for the past several years, Although central banks are among the most cautious and prudent institutions in the world, they are, perhaps surprisingly, among the first to implement blockchain technology.

Interestingly, while major banks are exploring the distributed ledger more widely, according to consultant Oliver Wyman, he thinks it will take another ten years before the blockchain is able to change core components in the finance industry.

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