UBS, Deutsche Bank, Bank of New York Mellon and Santander Team Up to Offer Digital Cash.

by Tim Sloane 0

This article in Bidness Etc indicates that banks are prepared to step into the world of digital currency to support blockchain transactions that also need to settle monetarily. Perhaps the good news is that the target deliverable date is not until sometime in 2018, which may even be a tad optimistic:

“Banking industry across the globe is obsessed with integrating blockchain technology with their current business model. Thanks to high cost cutting pressures and financial technology race, the banks are attracted to the technology.

Most recently, UBS Group AG, Deutsche Bank AG, Bank of New York Mellon Corp. and Santander Bank have teamed up to develop a new form of digital cash. The group intends to introduce the idea to central banks while proposing its first launch in 2018, as Financial Times reported. The proposed form of digital currency “utility settlement coin” has been pioneered by the Swiss bank UBS.

The concept of utility settlement coin is based on the Clearmatics Technologies’ solution to let financial institutions transact using digital coins, instead of traditional money transfers, for trading securities. The digital coin will be easily convertible into cash at central banks. The digital service will help cut cost and reduce the time for settlement and clearing. Additionally, the coins would be convertible to different currencies. Courtesy underlying blockchain technology, the trading coins can be easily swapped.

Hyder Jaffrey, UBS head of fintech innovation, suggested that “you need a form of digital cash on the distributed ledge in order to get maximum benefit from these technologies.” He added that such digital currency lowers the time of payment processing, which in turn “frees up capital trapped during the process.””

As with most innovation there is an expectation that the technology will cause reductions in headcount, but also increase the value of those most knowledgeable regarding the technology:

“Transition to the digital currency and technologically-driven payment process also means that the headcount will reduce as well. Earlier this year, Citigroup Inc. issued a report highlighting that banks pursuing process automation to compete against the increasing financial technology firms will result in high level of unemployment in the banking sector.

Unfortunately, a significant trend in the banking industry pertaining to blockchain technology, is flight of experts from banks to smaller startups. According to CoinDesk, members from the blockchain teams at JPMorgan Chase & Co., Deloitte, State Street Corp. and BNP Paribas have departed.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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