Royal Bank of Scotland (RBS) is aiming to pilot a service based on blockchain technology in 2016. The move would make RBS one of the first major banks to offer a product based on the emerging technology that many experts predict will radically disrupt the way the banking sector operates.
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RBS would not provide details of the likely service due to the commercial sensitivity of the project, but John Lyons, head of strategy and commercial services for RBS’s payments business suggested it is “on the fringes of payments” and said the bank would be ready to demonstrate the technology in early 2016.
“Next year, after Easter, we hope to demo a proof-of-concept proposition based on blockchain technology that could be piloted the same year and taken to market,” Lyons told Computer Weekly at the Sibos financial services conference in Singapore.
Blockchain is best known as the distributed database technology behind the virtual currency Bitcoin, but banks are investigating its broader capability as a real-time, encrypted distributed ledger for transactions involving a range of different financial assets.
RBS is one of nine founders of the R3 consortium, set up in September 2015 for members to work together on a framework and architecture for using blockchain in financial markets. Other members of the group include Barclays, Goldman Sachs, UBS and JP Morgan.
Lyons said that future uses of blockchain could include payment services, financial settlements and asset registers.
“Like most people, we’re in the ‘learn and explore’ phase with blockchain. We’ve announced our involvement in the R3 syndicate – that’s really important. Distributed ledger and blockchain requires a number of parties to be involved. Being involved in contributing to the development of protocols and standards and learning through that and with others is a priority. Do we see opportunity for blockchain around payments? Yes,” he said.
“We have realised that you need to spend money on discovering what the new world is about. What’s the business case for R3, for example? You’re investing in learning and cultural change.”
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Damian Richardson, head of payments strategy and innovation at RBS, told the EBAday conference in Amsterdam in May 2015 that one potential use for blockchain could be in a service to help customers in foreign countries who need emergency payments.
Blockchain technology potentially allows banks to securely record peer-to-peer financial transactions such as payments or asset transfers, without all the costly and cumbersome back-end settlement and reconciliation networks currently in use.
UBS group CIO Oliver Bussman, speaking in a conference session at Sibos, said: “Everybody agrees that the one topic we want to work together on is blockchain. The banks are getting ready to understand the impact and the use cases, and also to understand collaboration, open standards, which is why the R3 consortium is necessary. Regulators are actively involved in the discussion too. It’s only possible if we have critical mass in the industry and agree on standards.”