This is the ‘Big Bank’ version of the FinTech round-up. JP Morgan was the first of the really big banks to publicly announce the issuance of a digital token backed by USD on the blockchain. The news this week follows on from that, with several large financial institutions announcing other projects utilising distributed ledger technology.
BBVA – Bonds on the Blockchain
BBVA – the second largest bank in Spain with a revenue of $23.6 Billion and total assets of $750 Billion this week announced a €35 million structure green bond using an in-house developed blockchain platform.
A Bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental).
Seen as a cornerstone of the finance world due to their relative safety, the Bond market trades roughly $700 million on a daily basis.
By issuing bonds on the blockchain, the process which usually takes a day or two can be greatly reduced. There will also be full transparency as far as terms and timeframes are concerned.
This is a perfect example of how traditional financial vehicles of investment will be greatly improved by utilising this new technology.
Commerzbank – Blockchain as a Service
Commerzbank work with several Blockchain consortia, including Hyperledger and the Enterprise Ethereum Alliance as well as the aforementioned R3.
The Blockchain technology opens possible revenue streams for the Financial Institution, by not only operating as a broker between various parties making transactions but also providing the platform to enable the trade.
There is no doubt that Blockchain technology will become ubiquitous – the main challenge will be interoperability and ensuring the different chains can communicate with each other.
Japan – leading the way
In Japan, Mizuho Bank, with a revenue of over $1.1 Trillion has just announced they will be going live next week with J-Coin, a digital currency pegged to the value of the Yen. The J-Coin has been in development since 2017.
Japan are world leaders of the Digital Asset space. Government entities are making sure they act favourably to enable adoption via regulation. The Japanese were regarded as world leaders in technology with huge brands such as Sony and Panasonic taking the limelight.
In the ’90s and ’00s Silicon Valley became the mecca for innovation and investment. The Japanese view DLT as an opportunity to take this mantle back, and I would not bet against them.
Like JPM Coin, J-Coin is simply a stable coin, however, the target demographic aren’t huge financial institutions looking to make cross border transactions or settlements – they are everyday users.
Japan has the world’s 3rd largest e-commerce market in the world with annual growth at 9.1%. Mizuho and affiliates plan on capturing wallet share by offering discounts to 5% and 2% traditionally offered by card providers.
The payments space is extremely desirable for any business, because of the gold mine of consumer data with details on spending habits and patterns.
Which leads to the next piece this week.
Payments Market to Exceed $100 Trillion!
CEO of PayPal predicts digital payments will mature into a $100 trillion market. This is akin to Ronald McDonald saying hamburgers will be popular. In light of the news above and the constant innovation in the space, I agree with Dan Schulman.
We’ve seen over the last week how easy it is to make peer to peer payments with no fees via the Bitcoin Lightning Torch relay started on Twitter by Hodlnaught.
A criticism of the PayPal service is the fees involved. PayPal is still susceptible to time delays with cross border payments of substantial values.
User Experience (UX) is the key challenge that payment providers face in building a product. Right now it’s as simple as taking out a plastic card or cash to pay for goods or services. With the proliferation of mobile devices, applications are taking over and we can imagine a world in which we won’t need to leave home with our wallets.
Merchant fees are a huge consideration and once peer to peer transactions become the norm, rent-seeking middlemen can be removed from the equation.
Finally – Great news out of Korea
In further positive news this week, The Seoul Metropolitan government has announced a fund of $1Billion to invest in Fintech and Blockchain startups.
In an economy that suggests over 2 million citizens hold some form of digital assets, the move is a blessing for young entrepreneurs in the region. New companies in Silicon Valley or London traditionally raise $6-$7 Million, whilst in Korea, that figure is only $1.1Million.
That’s it for this week. If you would like to discuss any of these items further or if there is anything you would like to see on the site, please let us know in the comments, or reach me on Twitter @Nakameowdough