Will blockchain be a treasury game-changer?

Published on 23.01.2019

From every conference agenda to every trade publication, blockchain continues to be a hot topic of discussion in the treasury world. But will 2019 see distributed ledger technology (DLT) become less conceptual for treasurers and more practical? Or are tangible treasury solutions still some way off?

There’s no denying that DLT has the potential to create a trusted environment for all parties involved in a transaction and to accelerate settlement. And 2018 saw more organisations, including banks, using DLT-based applications for some elements of their business. In trade finance for example, treasurers have started to benefit from a handful of live blockchain solutions to help make open-account trade faster, safer, and more transparent.

But there is much greater potential for DLT going forward – not least as a painkiller for know your customer (KYC) headaches. As Bruno Mellado, Head of International Payments and Collections, BNP Paribas Cash Management, highlighted in our Journeys to Treasury Report 2018-19: “Complying with KYC requirements is a key ‘pain point’ for treasurers, particularly those who operate internationally across multiple banks. New technologies, which could include DLT, could transform this process.”

The idea, says Mellado, would be to create a trusted server for KYC documentation that can be accessed by different branches of the same bank. If this server were cloud-based, then it could be accessed by multiple banks, further reducing the KYC burden.

Equally, he notes: “DLT could be used to transact business using a single repository of counterparty details, avoiding the need to transfer this information on each transaction message.” DLT also has potential to reduce, or even eliminate, the FX spreads, which could be compelling for large transactions, he says.

So, while there are clearly many potential use-cases for DLT, what is also evident is that practical, treasury-focused solutions are still in their infancy. As such, 2019 is unlikely to see blockchain revolutionise corporate treasury departments. Nevertheless, treasurers would do well to keep up-to-date with new solutions that may leverage this technology since opportunities to glean process efficiencies and even create additional value for the business will undoubtedly emerge… in time.