Walking the walk: exploring the power of Blockchain

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Three years ago, Blockchain was only discussed by a select group of hard-core IT aficionados. Today, almost $1 billion has been invested in Blockchain start-ups. But despite the interest and intense work, no one has an end game in sight. There’s no killer app or key business proposition on the horizon yet. Financial institutions and FinTechs recognise the potential of Blockchain technology. But how will – or should – it be applied in the financial sector? The answer is out there. And we can’t just wait around until someone else finds it. We have to go beyond talking the talk. Banks who want to embrace the Blockchain phenomenon are already walking the walk.

ABN AMRO is one of the banks that is investing time, energy and resources into as many facets of the Blockchain phenomenon as possible. Arjan van Os Arjan van Os Head of Innovation Centre

Typically, businesses – and banks in particular – wait until technology reaches a certain level of maturity before investing time and funds into potential business cases or applications. So, why are we working so intensively now, when Blockchain is barely an adolescent? Because we suspect that when maturity happens, Blockchain will have an impact. The speed at which it is developing, and the potential solutions it can provide, has triggered financial institutions to get in on the ground floor and get involved in Blockchain’s ‘coming of age’.

Pioneering innovation

ABN AMRO is one of the banks that is investing time, energy and resources into as many facets of the Blockchain phenomenon as possible. We’re studying the infrastructure ‘fabric’ that will build the Blockchain and developing the applications that could utilise its strengths. We’re assessing the impact it may have on our core bank processes.

ABN AMRO is looking throughout its businesses where the new technology might have an impact. From mortgages to risk modelling to cross-border payments. We don’t know where this exploration will end up, and there are still many uncertainties. By spreading our resources across a vast range of experiments, we are preparing for any number of possible scenarios. One might say that we’re hedging our bets.

Teams with passion

More than 30 colleagues from throughout the bank have volunteered to help explore the possibilities of Blockchain. Spanning a wide range of departments and businesses, the teams are as diverse and far-reaching as Blockchain technology itself. We all share a passion for exploration and discovery in the Blockchain domain.

The teams work in a lean start-up inspired construction, in various compositions, to examine and prioritise different aspects of the Blockchain infrastructure, or different ways in which it might be applied. In regular Design Thinking Workshops, the teams review and extract Use Case Scenarios on which to work for six weeks. If the scenario proves to show potential, it becomes a structured experiment.

Making the connection

Like many banks, we’re joining Blockchain start-ups and open collaboration initiatives. We have committed to Linux Hyperledger and Digital Asset Holding to help explore the potential of a single, open-source platform for Blockchain applications. Techies from the Top 4 Dutch banks are looking deeper into the technology: testing various fabrics and experimenting with a first Blockchain-based payment apps. The Dutch Payments Association (Betaalvereniging Nederland) acts as the coordinating party and The Dutch Central Bank (DNB) participates from a regulatory perspective. All parties are joining this initiative primarily to learn together.

Building a foundation

Many believe that Blockchain’s ‘single source of truth’ and ‘Smart contract’ capability can change the face of real estate. So one initiative that might hold the key to a future Blockchain development can be seen in our Mortgage experiment. We’re developing ‘What if’ scenarios and Proofs of Concept to explore how Blockchain could eliminate uncertainties surrounding the estimation of collateral values.

Sharing the load

Another possible scenario involves how Blockchain might solve issues in the Financial Audit and Compliance Ledger, in the area of Financial Recovery and Restructuring (FR&R). Together with IBM, we are exploring whether Blockchain could help create data uniformity in the FR&R chain, based on a single shared ledger. IBM and ABN AMRO will equally share the Blockchain knowledge gathered in the project.

Cashing in

We have partnered with Tata Consultancy Services (TCS) to explore Blockchain’s potential in Clearing and Settlement. The experiment aims to establish a distributed ledger that can be integrated with legacy systems to create a ‘single source of truth’ and allow instant payments in cash settlements. If it works, we’ll be one step closer to envisioning the future of finance.

The search continues

This small selection of experiments merely scratches the surface. Our year of discovery and experimentation is taking us places we’ve never been before. The uncertainty surrounding Blockchain isn’t a roadblock. On the contrary, it is an exciting and uplifting opportunity. We’re working in ways we’ve never worked before. We’re keeping our minds open to all the powerful potential that’s within our grasp. We’re walking the walk. And when Blockchain is ready to transform the financial industry, we plan to be ready to transform right along with it.

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