Blockchain: a disruptive technology for Treasury Operations

RobAllen 141An April 2016 research briefing by Morgan Stanley found that financial institutions alone are expected to spend over US$1bn on blockchain projects in 2017.

Since blockchain has the power to transform banking infrastructure. Start-ups and fintech players are introducing disruptive and innovative solutions that challenge the traditional relationships between corporates and banks. Blockchain, in itself, could remove the need for trusted third parties to guarantee a transaction. As such, it could question the future purpose of a ‘Bank.’

The capability of block chain to transfer value has the capability to transform the financial services community. The technology can help to keep track of payments, transactions and trades such as bonds, loans or stocks. Alexandra Lecompte of Deutsche Bank sees strong value for Treasury Departments in the following areas:

• International payments: International payments still present several challenges when it comes to time for execution and security. Moving to a blockchain should shorten settlement time, speed up transactions and reduce the risk of fraud.

• Trade finance: A common challenge in trade finance is to ensure the goods transfer before the payment is made. With blockchain, all parties – including bank, trading houses, seller and buyer, customs, freight forwarders – are able to see when goods have been shipped before releasing the funding. With the adoption of both the “Internet of Things” (IOT) and electronic tracers on goods, the time spent on these steps could be shortened even further.

• Data management and reconciliation: Providing rule-based standards on data could enhance the quality and auditability of any transaction. Blockchain can also make reconciliation of complex data easier and reporting more efficient, since a common ledger is applied.

The World Economic Forum (WEF) predicts that banks will spend up to US$400m on blockchain technology by 2019, confirming the deep commitment from industry players to this global digital transformation. Deutsche Bank, amongst others, is running a portfolio of activities around blockchain in order to fully explore the potential of Blockchain for the bank, its clients and the markets in which it operates.