Tag Archives: Banks
NEW YORK (Reuters) – Banks are unlikely to use distributed ledgers to process cross-border payments for now because of scalability and privacy issues, according to Ripple, one of the most prominent startups developing the technology.
“I will concede, we haven’t gotten there yet,” Ripple’s chief cryptographer David Schwartz said in an interview.
Banks have been vocal about taking steps toward deploying the technology originated from cryptocurrencies to make processes like international payments faster and cheaper.
Several banks have tested or deployed a system Ripple developed for international payments that uses a “bi-directional messaging” that can eventually plug them into distributed ledgers, but xCurrent’s technology itself “is not a distributed ledger,” Schwartz said.
XCurrent was used to build Banco Santander SA’s (SAN.MC) international money transfer service One Pay FX, which was launched in April and hailed as one of the first concrete uses of “blockchain-based technology.”
Santander, which is an investor in Ripple, declined to comment.
While xCurrent uses cryptography, each party using the system does not have access to a shared ledger, as is the case with distributed ledgers like ethereum or Hyperledger Fabric.
“We started out with your classic blockchain, which we love,” Marcus Treacher, senior vice president of customer success at Ripple said in an interview. “The feedback from the banks is you can’t put the whole world on a blockchain.”
Distributed ledgers, an umbrella under which so-called blockchains fall, are immutable databases maintained by a network of computers rather than a centralized authority and secured by advanced cryptography.
The technology’s proponents say shared record keeping boosts efficiency and reduces data discrepancies, but distributed ledgers are not yet scalable or private enough for banks, Schwartz said.
XCurrent uses an immutable “interledger” protocol which Ripple says improves on existing payment networks because it offers instant settlement.
“What we hear from many of our customers is that it’s imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable,” Schwartz said. Ripple’s approach is what has enabled it to move beyond tests with banks, he added.
Founded in 2012, Ripple also offers a system called xRapid that works with the distributed ledger behind XRP, the third-largest cryptocurrency by market cap after bitcoin and ether. Ripple holds a large share of XRP.
The price of XRP and other cryptocurrencies soared last year, in part on expectations that their technology will be applied to processes including transferring value between financial firms.
xRapid and XRP are not being used by banks, but have been recently tested by money transfer companies Viamericas and MercuryFX, according to Ripple.
Reporting by Anna Irrera; Editing by Meredith Mazzilli
Frank Abagnale, the once-notorious confidence trickster portrayed by Leonardo DiCaprio in the film Catch Me If You Can, said blockchain is the future of secure information processing and data settlement.
A video has surfaced from Abagnale’s speech at a blockchain conference in April in which he shares his thoughts on the burgeoning technology.
“I think you have to be pretty ignorant not to realize that blockchain is the way of the future,” he said at the Blockchain Nation Miami conference. “It is the best way to secure information, to secure it 100%.”
For more than 40 years, Abagnale has worked with and advised hundreds of financial institutions, corporations, and government agencies. In his opinion, these institutions will begin embracing the technology. Blockchain is often defined as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.” Communication occurs between peers instead of through a central authority, and every transaction is visible to anyone with access to the system.
“I think you’ll see banks—especially accounting practices and accounting firms—all move to blockchain,” he said about keeping records on the decentralized network technology. “You cannot break the blockchain. You cannot hack into the blockchain. You can’t change anything on the blockchain.”
He outlines some privacy issues that need to be worked out when using the technology, but Abagnale said it is a technology that will “eventually be adopted by all types of governments, businesses, and corporations.”
Abagnale is alluding to a trend that is already in motion.
HSBC recently said it performed the world’s first trade finance transaction using blockchain technology. Santander last month launched a foreign exchange service that uses the distributed ledger tech to make same-day international money transfers. J.P. Morgan recently applied for a patent to facilitate payments between banks using the blockchain.
MILAN (Reuters) – Italy’s Open Fiber has enlisted banks to help fund the 6.5 billion euro ($ 8 billion) rollout of its fast broadband network, it said on Friday, confirming an earlier Reuters report.
Rome has long pushed for an all-fiber optic network to help Italian business and boost productivity. Open Fiber said its network would cover 271 Italian cities and around 7,000 municipalities in the country.
Open Fiber said it had signed the 7-year 3.5 billion euro project finance deal with BNP Paribas (BNPP.PA), Societe Generale SOCG.PA and UniCredit (CRDI.MI) and expects it to be finalised in the next few months.
The firm, which is jointly owned by state-controlled utility Enel (ENEI.MI) and state lender Cassa Depositi e Prestiti, said in its new 2018-2027 plan it was looking to take its fiber-optic network into about 19 million homes and businesses.
It added it would spend about one billion euros per year over the next three years.
Enel, which will use its existing power grid network to house cable, has said it intends to repeat the project in other countries where it operates.
Open Fiber’s new plan comes just days after investor CDP bought a stake in phone incumbent Telecom Italia (TLIT.MI) (TIM) in a move some say could open the way for an eventual merger of Open Fiber with the network of its bigger rival.
The government enlisted the help of Enel two years ago to build a fiber-to-the-home (FTTH) network after accusing TIM of acting too slowly to upgrade its ageing copper network.
But with TIM expanding its own network, industry experts say duplication of infrastructure makes little economic sense.
“With the approval of the new plan and the funding a new phase starts for Open Fiber with the aim of speeding up the roll-out of the FTTH network,” its CEO Elisabetta Ripa said.
The company said it had extended an existing deal with Vodafone (VOD.L) to cover all 271 cities covered by its plan.
Sky’s (SKYB.L) Italian unit last month signed a long-term deal with Open Fiber to allow it to offer internet TV in Italy.
($ 1 = 0.8114 euros)
Reporting by Stephen Jewkes; editing by Francesca Landini and Alexander Smith
Most major U.S. credit card issuers have now banned the use of their cards to buy Bitcoin or other digital currencies, in a move intended to decrease both financial and legal risk.
Citigroup also says it is halting cryptocurrency purchases on credit, and Capital One and Discover had already enacted their own bans. That means all of the top five credit card issuers have announced or implemented bans.
The moves are above all in the banks’ self-interest. As Fortune previously reported, the mania surrounding cryptocurrency late last year appears to have motivated many retail investors to use credit cards as leveraging tools, buying more cryptocurrency than they could afford. With Bitcoin down roughly 50% from December highs, many of those investors are likely underwater right now, and may not be able to pay off their initial Bitcoin purchases soon, if ever.
Get Data Sheet, Fortune’s technology newsletter.
Further, as Bloomberg points out, banks may be responsible for monitoring customers’ behavior to prevent money laundering after they make a credit-backed Bitcoin purchase, a tough standard for them to comply with.
The bans — or more to the point, the news of the bans — may exacerbate ongoing declines in cryptocurrency prices. After a hefty bounce Saturday morning, crypto markets broadly retreated on Sunday. Bitcoin is now trading at around $ 8,500 from a December high near $ 20,000.
In the longer term, however, tighter cryptocurrency investment controls, whether from regulators or lenders, seem likely to help mitigate the consequences of both hype and scams. For much of 2017, those threatened to overshadow the underlying promise of blockchain technology, which is still in the very early stages of evolution.
LONDON (Reuters) – Britain’s banks may be overstating their ability to stop “fintech” firms stealing customers and eating into profits, the Bank of England (BoE) said on Tuesday.
The BoE was publishing the results of its 2017 stress test of seven major banks: HSBC, Barclays, Lloyds, RBS, Santander UK, Standard Chartered and Nationwide.
For the first time, it included an “exploratory” scenario on how lenders would cope with a seven-year downturn and competition from financial technology – or fintech – firms.
Fintechs offer payment services and aggregate different bank accounts and balances via smartphone apps. New European Union rules from January will make it easier for them to compete with banks.
Fintech is creating opportunities for customers and businesses, BoE Governor Mark Carney said.
“In the process, however, it could also have profound consequences for the business models of incumbent banks,” Carney told a news conference.
The BoE said the banks tested concluded they could cope with prolonged low growth and fintech competition without making big changes to business models or taking on more risk.
The emergence of fintech, however, may cause “greater and faster disruption” to banks’ business models than the banks themselves project, the BoE said.
Fintechs may make it easier for customers to manage their money more effectively to avoid costly overdrafts. They could also direct customers to cheaper credit and avoid going into the red.
“These dynamics seem likely to impact both the quantity and price of banks’ overdraft products, which could lead to a material reduction in their profitability,” the BoE said.
Overdraft revenues contribute 2.6 billion pounds ($ 3.5 billion)to annual pretax profits at major UK banks, it added. Banks could also lose to fintechs some of the 800 million pounds in fees they charge for providing payments services.
Fintechs may also break or weaken the link between a bank and its customer.
“For instance, in the future, it may be possible for a customer to manage their finances with only minimal direct engagement with their banks.”
Stiffer competition from fintechs means that banks could have to double spending on marketing and cut their aggregate annual pretax profit by a billion pounds.
The BoE said banks in the test may also have overstated their ability to slash costs to maintain steady returns on equity to investors and keep offering a broad range of services.
“Supervisors will now discuss the results of the exercise with banks, including the potential implications of these risks,” the BoE said.
Reporting by Huw Jones; Editing by Mark Potter