With blockchain projects all the rage in the tech world, IBM have thrown their hat into the ring as they announced a loyalty scheme partnership with payment settlement network China UnionPay.
The two companies have said the venture would require the use of blockchain technology, which underpins the online crypto-currency bitcoin, as using conventional methods will prove overly complicated and expensive.
The aim of the two companies is to eventually add more loyalty type schemes into the project such as shopping reward cards and air miles.
Large banks and tech companies are looking very closely at the latest fintech blockchain developments, after initially being sceptical over concerns related to fraud. The technology basically comprises of specialised cryptography and complex algorithms, and was originally developed to facilitate the trading of bitcoins electronically, and without a central ledger, on a global scale.
“What IBM and UnionPay seem to be interested in is the ability of customers to quickly and painlessly trade in their loyalty scheme bonus points from one organization to another,” said a chief advisor at CTI China Renaissance in a note to investors. “For corporate usage, fintech is exciting because banks will be able to make back-office settlements much quicker, which could free up billions in cash normally spent on conventional trading.”
Several financial institutions, such as Bank of America and Bank of Tokyo-Mitsubishi UFJ, have been working closely with IBM on a number of fintech projects in the blockchain area. Sceptics still argue, however, that there is still the potential for dangerous abuse of the technology, and fintech is not at a level where it can have an impact on the financial services landscape as a whole.
“The impression I get is that the blockchain folks are looking for an itch to scratch,” says Illuminate Finance chief analyst Alexander Ross. “We only back solutions that address real-world issues in the business world. There are new blockchain companies materialising every month but they seem to be planning too far into the future.”
On Monday, Axoni, a capital markets technology firm, announced they had launched a blockchain system for several major players in the banking sector including Citigroup and HSBC. The software will help the companies sort and distribute their trading records more efficiently.
Digital Asset is another fintech company moving forward, partnering with the Switzerland stock exchange for a project involving post-trade securities processing to speed up floor transactions.
