IBM's new Blockchain Founder Accelerator could better position the distributed ledger technology as a platform for mainstream payments, but the technology giant wants to start with baby steps.
Blockchain, a system originally designed to support bitcoin payments, can enhance speed and execution for all kinds of payment cases such as supply chain management and financing, according to IBM. Though there is much attention to the use of blockchain in cross-border payments, other use cases might be better as near-term goals.
"Digital payments backed by fiat currency will be one of the killer apps for blockchain. We're already seeing this with Ripple. They are ahead of their time," said Jerry Cuomo, Vice President of Blockchain Technologies. "The technology can work for payments for and across all kinds of industries."
Loyalty may be the best place to start, according to Cuomo. This perspective echoes that of RBC, which is already using blockchain with its loyalty program.
"My view is rather than shoot for the gold like cross-border payments, loyalty may be better. That's not to say loyalty programs have less value, but there's less scrutiny than moving money internationally," Cuomo said. "You can get started with loyalty and them move onto cross-border payments once you have the asset types in place. The folks that do it that way are already two pivots down the road."
IBM's accelerator provides expertise, support, legal and business help for new blockchain networks. IBM has done prior work with blockchain to support security, compliance and retail marketing, and this new initiative will expand access to IBM's assets to boost adoption and scale usage. IBM is working off of a survey of 3,000 executives that suggests a growing market for blockchain. All of the respondents expect blockchain to support their enterprise strategy, while 80% of those exploring blockchain are investing to respond to pressures inside their industry. A third are using blockchain.
"Last year was a great startup year for blockchain," said Cuomo, noting IBM's work with SecureKey and banks in Canada on a national digital identity project. "We're now looking at collaborating with users from across industries. How can we accelerate development or flatten walls, or take friction out of the network?"
IBM plans to support business case development, offer incentives for members of its Founder Accelerator and help with business and legal issues. IBM will select the blockchain founders for the network; it charges a fee to participate, though there are scholarships available. The blockchain network founders will build use cases for blockchain in banking, logistics, manufacturing and retail.
Members of the accelerator will receive access to prebuilt software delivered via IBM's cloud, to reduce time and technical expertise needed to write code. There will also be workshops and comarketing with IBM and other network members. IBM will also provide software assets to complement the Hyperledger Composer, a collaboration tool to build business networks for blockchain, and one of the blockchain projects hosted by the Linux Foundation.
"We have several hyperledger fabrics that we are working on right now," Cuomo said, adding there are proofs of concept for cross-border payments, know your customer and anti-money laundering processes supported by blockchain. "Network identity is another killer app for blockchain. Many [ID strategies] are not doable outside of connecting to a blockchain."
In the payments industry, use cases are starting to emerge, such as supporting international payments for smaller parties that don't require the time and expense of correspondent banks; and to enable consumers to redeem loyalty points faster.
"In general blockchain technology is ideally suited for rewards platforms because the technology creates an amazing audit and reconciliation trail," said Michael Moeser, director of payments for Javelin Strategy & Research. "Essentially, this keeps people from double spending their rewards and helps the reward provider, such as the bank, with daily reconciliations to its balance sheet. "
Blockchain supported rewards also help with security and recover, since distributed ledger technology has built in safeguards if one of the ledgers is tampered with, enabling the system to recover quickly, Moeser said.