Blockchain technology, which underpins the virtual currency Bitcoin, could spur the development of numerous innovations in banking. By 2011, BNP Paribas had already grasped its great potential. Over the past six months, the group has reaffirmed its interest in this technology on multiple occasions, including by joining the R3 consortium, participating in the CDC workgroup and investing in the fintech startup Digital Asset Holdings (DAH). More recently, BNP Paribas even organized its second hackathon dedicated to Blockchain.
New opportunities emerge for the banking sector
Originally created to manage the virtual currency Bitcoin, Blockchain is an innovative technology enabling the decentralized authentication and recording of online transactions (see the box below), offering a host of new possibilities for the banking industry.
This technology’s tremendous potential could indeed power a wide range of applications in different arms of the banking industry. For example, banks view Blockchain as a powerful way to drive innovative projects both internally and within their ecosystem of partners and customers. Solutions for managing payments or clearing houses metadata, new payment solutions and tools for other bank transactions are all potential areas of development.
BNP Paribas continues to explore the potential of Blockchain…
Currently, the time it takes to authenticate a transaction – negligible on the Bitcoin scale – could be a stumbling block to services intended for mainstream industrial and consumer use. But if the technology improves and becomes capable of managing large numbers of transactions, it can transform the way major economic institutions interact by offering a great number of new possibilities.
“We have studied Blockchain within our corporate and institutional financing activity since 2011, by taking part in several of our industry’s focus groups and initiatives devoted to the technology,” BNP Paribas Blockchain manager for CIB teams Philippe Denis recalls.
…and joins two working groups to evaluate and upgrade Blockchain…
To evaluate Blockchain’s true potential and develop a standardized technology for decentralized authentication in the banking world, a Blockchain consortium was formed around American startup R3, which works to develop commercial applications for the financial sector. Numerous banks quickly joined the initiative, including BNP Paribas. More than 42 banking groups currently take part in the project.
In December 2015 another initiative was launched in France by the Caisse des Dépôts group. This “innovation laboratory” brings together 11 partners – including BNP Paribas – working to pool their research in order to evaluate Blockchain’s potential and uses. While the research group is also investigating the ethical, regulatory and normative aspects of the technology, the concrete aspects will be essential. The principle objective is to develop and prototype usage scenarios related to banking, finance and insurance businesses.
The consortium also invested in Digital Asset Holdings, which evaluates the global challenges relating to the decentralized storage and security of digital resources.
At the start of the year, BNP Paribas joined a dozen major companies as an investor in Digital Asset Holdings. A developer of distributed solutions for financial services, the startup has already raised the hefty sum of €50M. The Group’s investment reaffirms its commitment to new technology.
… after launching a hackathon to design new applications for the technology
In 2014, the Group’s CIB (Corporate & Institutional Banking) division organized a “Blockchain Bizhackatahon” for the BNP Paribas Securities Services entity, with a new hackathon planned for Transaction Banking in 2016. The two events give participants an opportunity to better understand Blockchain and anticipate its potential applications by exchanging ideas and proposals.
BNP Paribas is taking its efforts one step further by investigating the possibility of standardizing the technology on a large scale. However, Blockchain will still need a few more years before it can offer any real commercial applications and demonstrate its full potential.
Blockchain: a revolutionary technology
The ledger known as Blockchain is made up of different blocks compiled in chronological order. Each block corresponds to a specific piece of data. When this data is validated, its block is approved and added to the chain.
This sort of decentralized validation technology represents a major step forward in the financial world, but also provides fully secure means of transmitting any official document or certificate. Case in point: a French engineering school, the École Supérieure Léonard de Vinci, announced that starting this year it would certify its diplomas with Blockchain.