ING, the Dutch banking and financial services giant, spent 2016 building and testing 27 blockchain proofs-of-concept across six distinct business areas. The experiments touched payments, trade finance
ING, the Dutch banking and financial services giant, spent 2016 building and testing 27 blockchain proofs-of-concept across six distinct business areas. The experiments touched payments, trade finance and working capital solutions, financial markets, bank treasury, lending, and compliance and identity.
The work was exploratory. ING wanted to understand whether blockchain could solve real problems in banking. "For us, 2016 was about experimentation and getting to know the technology: how it works, how we can use it and what the pitfalls and limitations are," said Mariana Gomes de la Villa, senior program manager of ING's Amsterdam-based Blockchain Innovation team. "This technology wasn't built for the financial industry so there are constraints and it doesn't always cover our requirements."
One of the most promising trials tackled customer onboarding. Working with ten other banks, ING built a blockchain-based Know-Your-Customer solution that could reduce repetitive paperwork and bureaucracy. Under the traditional system, customers submitted identity documents each time they opened an account at a different bank or in a new country. With blockchain, they would do it once. The approach also improved transparency and security while cutting costs for the participating banks.
Trade finance showed even starker potential. A blockchain test in that sector demonstrated that operational and compliance costs could drop by 10 to 15 percent, while revenue gains for banks could reach as much as 15 percent.
Ivar Wiersma, head of innovation at Wholesale Banking and Gomes de la Villa's boss, sees blockchain as foundational infrastructure for banking's future. "Blockchain started eight years ago with bitcoin. Now we need new developments like smart contracts and digital identity so blockchain can become the technology standard for the next generation," Wiersma said. "Blockchain has the potential to profoundly change the financial services structures."
For 2017, Wiersma wants the team to narrow focus to five or six promising use cases and move toward pilots that customers can see and engage with. "We will introduce more of these pilots and tests that make clients enthusiastic. Not every pilot will be a home run, but that's OK. I see them as stepping stones, showing us what's possible," he said.
He also emphasized that blockchain work makes no sense in isolation. The technology only functions as a network. "It's a network, so working on your own is useless. It's like being the only one with a mobile phone," Wiersma said.
Gomes de la Villa flagged the major technical and regulatory hurdles that still stand in the way. "Each solution should comply with many more areas: performance and scalability, the regulatory and legal framework, privacy and confidentiality. That's also why collaboration with the business and external partners is so important," she said.
Throughout 2016, ING partnered with multiple players to advance the work. The bank collaborated with the consortium R3, various fintech companies, the Dutch central bank, the Dutch Payments Association, and the European Banking Forum. ING also ran workshops for internal teams, business partners, and external stakeholders including EU commissioners and members of the European parliament.
In January at the World Economic Forum in Davos, ING revealed that its Bootcamp winner Easy TradING Connect, together with trading house Mercuria and Societe Generale, had executed the first large-scale oil trade using blockchain technology. The move could reshape an industry known for relying on paper documents and traditional processes.
ING is backing the Dutch Blockchain Hackathon, a three-day event scheduled for later this month. The hackathon aims to build connections between startups, students, small and medium-sized IT firms, major corporations, research institutions, and government bodies to advance the broader blockchain ecosystem and create new opportunities.
