JPMorgan, together with the Royal Bank of Canada and ANZ, has trialed blockchain technology since October 2017 to speed up the processing of payments with errors and those that need extra compliance checks. Now, over 70 banks, including Société Générale and Santander, are set to join the blockchain network, dubbed Interbank Information Network (IIN).
The blockchain ledger allows banks to address issues during the processing of transfers — such as additional compliance checks, faulty addresses, or missing data — in real time, which can conventionally lead to week-long delays. The banks expect to process 14,500 US dollar payments per day via INN, and the sum will likely increase if more players opt to join the network.
JPMorgan’s blockchain network is likely a move to keep up with fintechs in the transfer space. A number of fintechs are seeing success by reducing friction in the conventional cross-border transfer process with new technologies — UK-based money transfer app TransferWise now processes over £3 billion ($3.95 billion) every month, for example, and it’s profitable.
However, by leveraging blockchain technology, incumbents may be able to solve these issues in-house, helping them to stave off this disruption. If banks can successfully speed up cross-border transfers on their own, it could hamper future partnerships and business for companies like TransferWise.
However, a quick and efficient network is not enough to keep customers satisfied.While speeding up the transfer process is good move, and will likely improve customer experience, it will probably not be sufficient to compete with fintechs in the space on all levels. TransferWise, for example, only charges 0.35% for transfers from the UK to the eurozone, while incumbents charge 7% for global transfers, on average.
To truly overcome the fintech competition, incumbents need to lower their fees in addition to making their processes faster.
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