This time last year, the dust hadn’t settled on the Blockchain hype, and several key players within Fintech and Financial Services were quite upbeat about the possibilities. However, as results of PoCs from various consortiums, central banks and payment providers emerged, the results were mixed. Daily Fintech covered an article on R3’s miseries towards the end of last year when Goldman Sachs left the consortium.
Since then, R3 publicly moved away from Blockchain, into a Blockchain inspired world using an open source distributed ledger named Corda. The R3 consortium lost three major banks towards the end of last year. This is vastly attributed to the fact that they chose to move away from a pure Blockchain implementation to a Distributed Ledger implementation for Corda.
The three banks Goldman Sachs, Santander and JP Morgan left the consortium and invested in Axoni that was a pure Blockchain firm. It got worse when R3 blogged that they were not a Blockchain firm, and had always been a distributed ledger company and got trolled on social media for that.
This was shortly followed by the news that SWIFT had launched its inter-bank payments platform that it believed would be the future of its cross border payments platform. The platform was called GPI (Global Payments Innovation), and had a founding consortium of 12 global banks. The GPI, at that time was based out of traditional technologies and not Blockchain. However, earlier this month, SWIFT announced that GPI was being beta tested on Blockchain with 22 new banks validating the system. Verdict on this PoC is going to be at Sibos later this year.
Apart from this, the Bank of England (BoE) haven’t delivered a conclusive verdict on the PoC with Ripple for Cross border payments. The detailed report on the PoC was released earlier this month. The key message was:
” Cross-border payments when applied to wholesale markets present different challenges than when compared with retail and corporate transactions, which the Ripple product is designed to handle. The availability of liquidity is one such challenge, and the PoC allowed the Bank and Ripple to begin exploring these questions. “
In other words “Ripple’s solution wasn’t fit for purpose”, although Ripple chose to see it differently. A few days later, Ripple announced that a pure Blockchain based approach was not scalable for banks and advocated a “Hybrid approach”.
Wearing my technology hat on, I see some fundamental lessons here, and I may be repeating what has been so often mentioned.
- Find technologies that can solve your problems – it may not have to be Blockchain.
- Do not interchangeably use Decentralised Ledgers and Blockchains. You can photocopy on a Canon machine too (not just on Xerox).
- Innovation doesn’t always have to be on sexy technology. SQL Server and Oracle can do the job too.
- Simplicity is often overlooked and massively underrated.
I believe that SWIFT’s announcement of the results of their Blockchain PoC at Sibos could provide a decisive direction for Blockchain in Financial Services/Payments. And it might well be “Let’s Move On”.
Arunkumar Krishnakumar is a Fintech thought leader and an investor.
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