How the UK payments industry can build blockchain into its strategy
26 January 2021
There’s no doubt blockchain technology has a role to play in the global payments industry. The question for UK banks, building societies and other institutions is when, how and where they fit it into their schedule.
In a new report, Time for Trust: The trillion dollar reasons to rethink blockchain, PwC economists have said that blockchain technology is on track to generate some US$433bn for the global economy in the payments arena over the next decade. As the report explains, central banks around the world have been exploring how blockchain can improve payments infrastructure through central bank-issued digital currencies (CBDCs), and financial institutions have been experimenting with stable-coins to transform cross-border and remittance payments.
Yet for the UK payments industry, blockchain isn’t as high on the list of priorities as it could be. The industry is understandably preoccupied with the new payments standard, ISO 20022. This creates a common language for payments data across the globe. It’s also a massively complex system which is forcing sweeping processes and technology changes.
But if this migration to ISO 20022 is done well, flipping blockchain solutions into it should be fairly straightforward. In fact, reading Time for Trust, it strikes me the timing of the ISO overhaul could chime perfectly with the rise of blockchain. In the report, PwC economists say they expect the majority of businesses to be using the technology in some form by 2025, followed by a steep acceleration of economic benefits.
This is good news for the UK payments industry - it means organisations can make sure that what they are investing in ISO 20022 transformations will support this acceleration in blockchain. Blockchain is already benefiting the payments industry in a number of ways - from gaining greater transactional security or transparency on liquidity issues and protection from illicit activity, to streamlining processes.
"The push for Open Banking will strengthen interoperability between financial institutions, challenger FinTechs and digital asset service providers. With the advent of robust regulatory frameworks such as the 5th Anti-Money Laundering Directive (AMLD5), Markets in Crypto-assets (MiCA) and standards such as ISO 20022 much is to be gained in terms of underpinning these blockchain based innovations.
“I have long maintained the position that the blockchain ecosystem can be more transparent than the traditional system. But as the rest of the financial system implements blockchain, synergy and accountability will increase. As a RegTech building this vision we have recently been experiencing unprecedented institutional interest in our analytics suite as the potential for this technology kicks off. We look forward to a unified Open Banking world.”
Pawel Kuskowski, CEO and co-founder, Coinfirm
Blockchain is fundamentally changing financial access, opportunity and trust. You don’t need to have all the answers now, but by preparing your organisation, you won’t be left behind when the time for action comes.
To find out more about how blockchain can create value for your organisation, get in touch.