Nordea Bank : What ever happened with Blockchain?

Blockchain kicked off as a revolutionary spin off technology from the bitcoin currency; a technology intentionally designed to facilitate an encrypted way to transact value, information or data over open networks, disintermediating the cost of the middle person. This promised the replacement of legacy solutions that were not designed for, but needed to adapt to a globally interconnected world. Much excitement followed as blockchain appeared to have the potential of revolutionising every industry's business models, and that included also financial services. It has been a couple of years now since the 'Big Buzz', and with all the bees now buzzing around AI, IoT and API honey pots, it gives us the chance to ask the question:

What ever happened to the blockchain?

The initial frenzy over the potential applications for Blockchain discussed throughout the financial ecosystem eventually settled down into various practical use cases. The most hopeful included simplifying regulatory reporting, compliance and KYC (Know Your Customer), transforming paper-heavy trade finance, streamlining reconciliation processes in clearing and settlements. If national banks were to issue crypto-currencies, there could be an opportunity to revolutionise payments through reduced transaction costs, improved speed, efficiency and transparency.

Nordea and the R3 Consortium

Central to Nordea's work in blockchain is our membership since 2015 of the R3 Consortium, which aims to facilitate the common interests of financial institutions in the emerging blockchain space. Our participation in R3 ensures we get first-hand knowledge of new developments, that we establish close cooperation with academics, fintechs and other banks and regulators, and crucially, have a voice to define and influence new industry standards.

We recently renewed our commitment to this group by participating in the second round of funding for R3 that gives the consortium the assets they need to continue further development of the much-awaited Corda Distributed Ledger Technology (DLT) platform, to which we have directly contributed development resources (from our Transaction Banking area).

Blockchain or Distributed Ledger Technology (DLT)?

Corda made the headlines recently when the R3 Consortium mentioned publicly that Corda is not and has never been a blockchain solution. This surfaced an interesting debate in the industry about what is a blockchain and whether we should move to use a broader term like Distributed Ledger Technology (DLT) instead to define the scope of this technology more accurately. It's safe to say that this debate is still ongoing.

Debate or no debate, in Nordea, we are going full speed ahead with experimenting and learning in key DLT areas both inside and outside of the R3 Group. Last year, Nordea presented Know Your Customer pilot outcomes - executed in cooperation with other Nordic peer financial institutions - that aimed to improve customer experience and providing an efficient KYC process for the Nordic financial sector. The hope is that DLT can usher in more efficient digital identity management and a single source for customer data sharing across banks and for reporting to regulators. On top of this we're also working with more projects internally.

DLT has plenty of untapped potential

The hype machine has moved on, but the dreams around the potential of this technology have not. We at Nordea will continue to work, experiment and learn so one day our customers can benefit from the enormous potential of this technology, being these faster, cheaper and more secure banking services or even new value propositions.

The truth is that with the speed of change we see in today's market and on the consumer behaviour, it is impossible to predict what the future will look like. Instead, we need to focus on learning and building the capabilities which will (like a 3D printing machine) allow us to be flexible and quickly adapt to what the future brings in order to always remain relevant to our customers.

/Erik Zingmark, Co-Head of Transaction Banking at Nordea. Follow me on Twitter: @erikzingmark