Can blockchain jolt energy payments? What about real estate?
Distributed ledgers such as blockchains have already attracted interest in streamlining cross-border transactions for e-commerce marketplaces, and the idea will soon be put to the test in markets such as energy payments and real estate.
In the power industry, for example, there’s a chance to trim time and cost from complicated transactions between power plants and the suppliers who sell electricity to consumers.
“When [suppliers] buy at wholesale, they want to be paid quickly,” said Joseph J. DePaolo, President and CEO at New York-based Signature Bank.
Signature Bank on Jan. 1 will open its Signet Platform to support real-time settlement for commercial payments. The bank is collaborating with trueDigital Holdings, a New York-based blockchain infrastructure, exchange and settlement technology company.
Signet is positioned as a streamliner, similar to how Ripple and R3 use distributed ledgers to remove the need for correspondent banks for cross-border payments for P2P transfers and e-commerce payments that are too small and frequent for more robust systems.
Typically, in the case of commercial payments, funds are transferred between two different institutions on behalf of the corporates, according to DePaolo. With Signet, funds are transferred in real time directly between companies, eliminating any dependence on a third party. Transactions made on the Signet Platform settle in real time, incur no transaction fees, and require a minimum account balance of $250,000.
Once a company is onboarded, it can use the platform to transfer funds to other onboarded companies. “We’re learning right now what ecosystems can benefit from this,” DePaolo said.
DePaolo did not name Signet's users, but mentioned markets that should benefit from the platform. In addition to the energy market, DePaolo said the bank was in discussions with a shipping company, and added the commercial real estate market would also be a fit.
For example, real-time payments could help companies manage the time elements necessary to properly execute certain commercial real estate transactions.
The Signature-trueDIgital collaboration joins a likely trends of partnerships and investments as banks, fintechs and other companies search for specific benefits from distributed ledgers.
Investment in blockchain has increased over the past two years as distributed ledgers grow beyond their original use as the technology that underpins cryptocurrencies such as bitcoin. But the growth hasn't come painlessly, and collaboration among parties is also a challenge.
“All participants in any significant blockchain implementation must carefully evaluate how the technology is managed and who is liable should operational or regulatory issues arise,” said Tim Sloane, vice president of Mercator Advisory Group.
In materials the bank provided to PaymentsSource ahead of an interview, Signature Bank said that the Signet Platform has been approved for use by the New York State Department of Financial Services. Deposits held within the Signet Platform are eligible for FDIC insurance, up to the legal insurable amounts defined by the FDIC.
During the interview DePaolo said participants in the platform have to be approved commercial clients that have cleared Bank Secrecy Act and know-your- customer vetting. “They have to go through our rigorous account opening procedure,” he said.