Will Banks Cannibalize Revenue Adopting Blockchain for Cross Border Payments?

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By now, many of us have all seen various posts around the blockchain and how it can impact everything from getting a mortgage to selling a security. It’s why all the old guys over the last few years have been coddled up to the twentysomethings – an interesting marriage of connections and business acumen with a deep understanding of how the software and cryptography works.

A few blockchain vendors have contacted me recently and one common theme I hear from them is banks are much more accessible to taking their meetings than just a year ago.

Banks history with product substitution and the effect on revenue is not good. No one likes to give up revenue. But in the trade world, it was forced on banks as many companies moved away from the letter of credit to open account.

That didn’t come without its own risk, as the LC has a value proposition that open account does not have.

Now we are looking at the next wave of attack on bank revenue in Global Trade & Treasury, and that is international wires. Wires just plain suck. They are expensive to originate and you need to make sure you have all these special codes such as Swift Code, Routing in Transit #, IBAN #(International Bank Account Number), not to mention the beneficiary name and account number need to be exact.

But is Bitcoin really catching on with corporate Treasurers?

I certainly think they are much more willing to give it consideration, particularly in the area of cross-border settlement.   We know the delays that can occur sending money cross border. If you want to send a $1 million to India, good luck originating the deal with certainty and even better luck tracking.

Is Ripple the answer here? Earthport? Others? I am sure banks are trying to figure this out. The international wire space has been the domain of SWIFT and their monopoly on messaging traffic. Now when you have an electronic ledger not owned by anyone that can tie in to a distributed network of trusted institutions in seconds that’s impressive. The question becomes who are the trust brokers if not banks?

The days of hefty international wire fees and delays could be numbered.

Shameless self-promotion: Each day I get reader emails asking how to sign colleagues up to Trade Financing Matters. It’s simple, just have them go here. Spread the word…

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