Banks Still Searching for Practical Applications for Blockchain Technology

It might seem like blockchain has been all the rage among banks and fintech companies, but a recent Bank Innovation poll found that many of these companies don’t have any blockchain projects in the current pipeline of their innovation initiatives.

When asked to describe their company’s involvement with blockchain technology, 30% of the poll-takers said their institution is not considering investing in the technology at the time. And about 17% — 38 people — voted that while there are no current blockchain initiatives in the works at their organization, it is likely there will be in the future.

Over the past few years, particularly last year, blockchain and distributed ledger technology emerged as a favorite topic for banks to boast about at conferences and earnings call. Larger banks such as Bank of America and JPMorgan Chase have been collecting patents related to blockchain.

Most recently, JPMorgan Chase filed a patent in which the bank said it is working on project to use DLT as a method for processing network payments between banks using a P2P network. The idea behind this system is reminiscent of NACHA’s realtime payment initiative in which two banks can send and receive payments on behalf of their corporate customers in real time.

JPMorgan Chase has not revealed much about the project, except for making the patent filing public in May. Bank of America still reigns the king of blockchain patents with over 50 patents, according to its CTO Cathy Besant, who told the audience at CB Insights Future of Fintech conference last month. In fact, earlier this year the bank beat technology giant IBM with the most blockchain patents for any company.

But even Bessant admitted that BofA had not found large-scale opportunities for practically applying blockchain yet.

In fact, besides cross-border payments in trade finance, there have been almost no significant practical use to blockchain. Even regarding cross-border trade finance, banks like HSBC and ING are just starting out, neither have rolled out a wide-spread integration yet. 

In June, Bank Innovation reported that perhaps the financial services industry is not prepared to take advantage of what the technology offers. Sure, blockchain could help with cost savings, but in terms of transactions, FIs are still figuring out what to do with the technology and how to go about applying it.

Still, blockchain seems to be an integral part of the discussion around innovation, and there are some already working on blockchain initiatives.

Bank Innovation’s July poll found that 22% (47) of those surveyed are working on blockchain pilots or POCs, while 18% or 38 people said they have at least one blockchain based initiative up and running.

Results for Bank Innovation’s July Poll on “Describe your company’s involvement with blockchain,” ran as follows:

a)     We have at least one blockchain implementation up and running: 18%

b)     We are working on a blockchain pilot or POC: 22%

c)     Not working on it now, but it’s on our roadmap: 17%

d)     We are not considering investing in blockchain at this time: 30%

e) Blockchain? What’s that?:  13%

Bank Innovations poll was conducted over the month of July. Want to participate in our next poll? Look to sidebar at right.

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