Ripple Makes Waves

Posted on : 27-10-2017 | By : Tom Loxley | In : Bitcoin, Blockchain, Crytpocurrency, DLT, Finance, FinTech, Innovation

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The big banks seem to have stopped resisting and begun embracing blockchain technology…well, at least when it comes to embedding the technology into their payments and transactions. Some time ago now Ripple (the digital currency and distributed payment network) pitched its tent on the Swift network’s front lawn and has been an increasingly irritating thorn in the payments provider’s side. (Description of Ripple provided by coindesk.com.)

It seems that Swift can no longer deny the clear advantages of blockchain technology, or perhaps in a savvy move, Swift has let Ripple do the hard work when it comes to the risk and testing involved in new employing a new leading-edge technology. But it’s more than just a new piece of code or tech that Ripple and the other big cryptocurrencies have brought to the financial services (FS) arena. It’s more like a paradigm shift.

For years the financial institutions have been upgrading software and bolting on workarounds to try and keep up with new demands and ever-evolving marketplace. This has resulted in a metaphoric Frankenstein of IT stacks and ageing and outdated technology. Some of the bigger institutions still have to wheel in the experts from the 80’s to deal with their issues because the tech is so old the IT workforce of today just don’t get exposed to it. Talk about choke points or single points of failure.

Big names from the FS industry have come out swinging against the cryptocurrencies boom with the likes of Jamie Dimon of JPMorgan and Larry Fink of Blackrock voicing their issues with Bitcoin. Now I’m not a diehard fan of cryptocurrencies, and I see the obvious concern with what appears to be the massive bubble that is Bitcoin and some of the other more expensive digital currencies, but there is part of me that hails them for the disruptive kick up the backside they seem to have given the FS industry.

Whatever you may personally think about Bitcoin and the early cryptocurrencies, their presence has created choice, a new way to transact value with some real benefits (transparency, security, more autonomy/control, speed, and lower costs) using blockchain technology, or Distributed Ledger Technology (DLT) as it is becoming more widely known as in the FS circles. (As if renaming it and slightly tweaking the definition has somehow distanced them from admitting there is real value in something that was widely scoffed initially.)

By popularising blockchain technology, cryptocurrencies have forced the FS industry to take a serious look at their technology and this (in my opinion) seems to have busted the door open to other new FinTech ideas. In fact, it now seems that the bigger institutions are clawing to be the first in the FinTech race and woe betide the Innovation Executive who is responsible for passing on the next bit of groundbreaking software, especially if the competition picks it up. Innovation is the new name of the game.

Ripple has continued its assault on the Swift network by boasting that its distributed financial technology can help banks cut the time and cost of clearing transactions and at the same time allowing new types of high-volume, low-value global transactions. Ripple also hosted their conference called “Swell: The Future Is Here” over the same period in October and only a few miles away from Swift’s Sibos event. They came out guns blazing with Ben Bernanke and Tim Berners-Lee headlining at their event and have made it clear the time and location of the event was not a coincidence.

Ripples tenacity seems to be paying off with over a 100 banks and FS organisations signing up to its network. Swift is hitting back with the 3rd phase of its global payment initiative (SWIFT gpi) focussing on DLT. Many of the larger banks have joined forces with Swift to explore the DLT Proof of Concept reporting initial success.

Swift is not the only large FS organisation exploring in this space. Indeed, despite Jamie Dimon’s opinion of Bitcoin, apparently he’s not opposed to the underlying technology. JPMorgan has used the Ethereum blockchain protocol as a base for Quorum, a DLT platform designed to support any application requiring high speed and high throughput processing of private transactions within a permissioned group of known participants.

Many other FS organisations are also exploring privately and collectively in consortiums to win the race and harness the power of the blockchain.

The irony here is that while we’re all caught up in this whirlwind of disruption to the FS industry, at the end of it all what is the real impact a year or so down the line? Kelly, the insurance broker from Doncaster, South Yorkshire makes the deposit payment on her new 4 bedroom semi-detached and says…hmmm…that was quicker than I remember a few years ago… and then gets on with her day. Or am I just being cynical?