Bankers have historically been skeptical of how secure blockchain technology will be for their tightly regulated industry.
But that attitude has shifted dramatically over the past few years as they have become more familiar with the technology and more excited about its potential uses.
More than half of business executives say that blockchain will be critical to their company’s success over the next three years, according to a report by Accenture.
And in a Deloitte survey of over 1,000 executives globally, 43% said blockchain is one of their top-five strategic priorities.
At the Consensus 2018 conference, FedEx's founder and chief executive, Frederick W. Smith, said, "Blockchain has the potential to completely revolutionize trade across borders."
Some banks are making large investments in assorted initiatives involving distributed ledger technology.
The following is a look at why and how institutions in the financial services industry are using blockchain.
Bank blockchain leader
By adopting blockchain, the global banking industry could save as much as $20 billion by 2022, according to the management consulting firm Accenture.
Santander certainly seems to think that will happen. It became the first U.K. bank to use blockchain to create a new international payments service, One Pay FX, which will first allow customers to transfer money between Santander accounts in Europe and South America.
Santander also piloted a blockchain effort for shareholder voting with Broadridge, JPMorgan Chase and Northern Trust.
A boatload of efficiency
HSBC, meanwhile, has used a shipment of soybeans as a test for a trade finance transaction using blockchain. Working with the Dutch bank ING, it issued a letter of credit for the U.S. food and agriculture firm Cargill.
HSBC used a platform from the blockchain consortium R3 and said it completed the transaction in 24 hours. Usually such trades require up to 10 days for paperwork to be cleared.
Testing continues at JPMorgan's Quorum
Batting off rumors it will be spun off, JPMorgan Chase's blockchain unit Quorum has tested a new application to handle finance instruments, and phantom-issued a $150 million, one-year, floating-rate Yankee certificate of deposit on the blockchain.
“Overall, the promise of blockchain is that you’re sharing infrastructure between participants — so issuer, dealer, investors, custodians and administrators can all see one golden source of truth of a trade or in this case a debt instrument,” said Christine Moy, program lead for JPMorgan Chase’s Blockchain Center of Excellence.
Banks trading crypto?
Amber Baldet, the former head of JPMorgan's blockchain unit, meanwhile, says that Wall Street will start trading cryptocurrencies "sooner than people probably think." She acknowledged, however, that obstacles remain.
"But even where the will is, the legal and regulatory framework is challenging," she said.
Goldman Sachs has become one the biggest investors in blockchain technology, according to CB Insights.
The cryptocurrency startup Circle, which is backed by Goldman Sachs, raised $110 million in an investment round led by the Chinese virtual coin mining giant Bitmain Technologies on May 15. Goldman is still committed to being the first Wall Street bank to open a bitcoin trading operation.
United under one blockchain
The Indian IT giant Infosys is piloting a trade network called India Trade Connect with seven Indian private banks.
The network aims to digitize trade finance business processes, increase automation and transparency and help manage risks in chain financing.
Bank of Montreal joined several European banks in developing Batavia, a blockchain trade finance platform.
The consortium — which includes Spain’s CaixaBank, Germany’s Commerzbank, Erste Group of Central and Eastern Europe-based, IBM and Switzerland’s UBS — said it successfully completed its first live pilot transactions with corporate clients in April. Among the trades? Cars and fibers for textiles.
Payments technology entrepreneur Will Graylin is launching OV Valet Superkey, a payment card and digital wallet that can initiate touchless payments at more than 90% of all payment terminals. It pairs with an app that supports messaging and live chat functions.
Capital markets play a key role in a modern economy because they move money, stocks or bonds from people who have them to those who need them to execute trades, secure equities or invest. But as core a function as this is, it hasn't been very fast.
Visa on Monday made an investment in Global Processing Services, which powers the payment rails for several challenger banks and fintechs. It's similar to a January investment Mastercard made in Marqeta, an open API card issuing and processing platform.