The European Banking Association has published an information paper looking into potential benefits and use cases of cryptotechnologies in international payments. The report explores the opportunities and real life options for blockchain technology to aid payment service providers (PSPs) to lower costs, by increasing efficiency and lowering transaction times.
The paper initially reports on the plethora of challenges which are currently being worked on in the international payments industry. Challenges include but are not limited to KYC and fraud checks, liquidity costs, regulatory differences, reporting requirements, a lack of transparency, timely processes, and the non-competitive character of the current industry (as it is dominated by a few banks).
The writers progress by looking for possible opportunities for blockchain-related technology to solve these issues by capitalising on the nature of a public ledger, which is ostensibly transparent and uniform. This transparency allows banks to forego time-consuming compliance procedures, while remaining in accordance with the regulators. The authors stress that one of the most important requirements for new technologies to be effectively adopted is industry collaboration, including between regulators and outside parties.
One of the user cases provided by the paper revolve around the construction of a KYC registry, which is maintained on a public ledger using standardized industry identifiers to share data between banks. Compliance and KYC checks are one of the fastest increasing costs for internationally operating banks, with requirements set to become even more strict in the near future. Reducing these costs may become a vital issue for banks to remain competitive.
About the EBA’s Cryptotechnologies Working Group
The paper was written by the EBA’s Cryptotechnologies Working Group, which consists of a team of industry experts that commit themselves to researching new business opportunities that stem from applying blockchain related technologies within the space of financial services.