Wealth begins its blockchain reaction

Ambitious financial services firms are driving Australia's global leadership in the development of blockchain technology, which is already delivering productivity and innovation benefits to the nation's trillion-dollar wealth industry.

BNP Paribas Securities Services has progressively stepped up its blockchain expertise in the Australian market because it sees a nation filled with opportunities. BNP Paribas global head of securities services, Patrick Colle, says Australia has been a business investment stronghold because in many areas it is "the most advanced in the world."

Colle says an important attribute making Australia one of the most sophisticated global markets on blockchain is the initiative of the ASX to replace its dated CHESS clearing and settlement system.

"We're on six different working groups [here]," Colle says.

He makes it no secret that the BNP Paribas expansion strategy is deliberate and the company is exposed to blockchain "in every way possible." Over the next three years the firm is allocating €1 billion to its corporate and institutional banking division and this includes building out blockchain, artificial intelligence and big data capabilities.

The ASX approach to replacing CHESS using blockchain technology has been a collaborative knowledge-based process. Publicly the ASX has said it will make a final decision on Australia's post-trade technology before the end of 2017.

Hype or not, Australia's wealth managers have implemented several blockchain or distributed ledger solutions solving vast problems and inefficiencies in the marketplace.

In October 2016, the Commonwealth Bank and Wells Fargo embarked on the first blockchain-based global trade transaction between two commercial banks. The transaction involved a shipment of 88 cotton bales from Texas to Qingdao, China using a distributed ledger known as Skuchain's Brackets system.

In July 2017, ANZ and Westpac teamed with IBM and shopping centre operator Scentre Group to digitise the bank guarantee process used for commercial property leasing. The trial used distributed ledger technology to eliminate the need for current paper-based bank guarantee documents, resulting in a single source of information with reduced potential for fraud and increased efficiency.

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Blockchain's potential is not being lost on industry researchers either. CSIRO's data innovation Data61 recently completed a comprehensive review of how the technology could be used across government and industry.

"Trade finance and insurance are highly promising areas that may benefit if high-quality logistics and commercial supply chain documentation becomes available on blockchain," the Data61 review said.

Data61 group leader Mark Staples says looking at the range of critical requirements in specific contexts "helps us understand how blockchain-based systems can support new markets and business models."

This is an extract of a news story first published in the latest issue of Financial Standard. You can view the full article on our iPad app.

Read more: BlockchainAustraliaASXTradeFinancial StandardANZBNP Paribas Securities ServicesBracketsChinaCommonwealth BankCSIROIBMMark StaplesPatrick ColleQingdaoScentre GroupSkuchainTexasWells FargoWestpac
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