WHY BANKS ARE INTERESTED

Governments and financial institutions are mostly lukewarm on the idea of cryptocurrencies, but enthusiasm amongst leading global financial players for blockchain technology appears to be spreading at bushfire-speed.

While early reports suggest blockchain is separating the top-tier institutions from the smaller players, the technology is seen as a way of slashing the cost and time of clearing inter-bank transactions, as well as creating a more secure system. At the moment, the situation seems to mirror many previous new technology arrivals, with stakeholders scrambling to form new alliances to commercialise blockchain technology (think ‘VHS vs Beta’ of the mid-1980s). The most significant of these alliances so far from an Australian perspective is the R3 consortium ( r3cev.com), which includes three of Australia’s ‘ big four’ local banks — Westpac, Commonwealth and NAB — as well as more than 40 other banks and financial institutions around the world.

Testing of the technology is well underway, with the Commonwealth Bank and 10 other global banks setting up a blockchain trading simulation in January 2016 with Microsoft’s Azure enterprise cloudstorage playing host ( tinyurl.com/ apc437-commbank). That was followed in March by a much larger trial involving R3 members testing a range of blockchain technology providers including IBM, Intel and Ethereum ( tinyurl.com/apc437-trial). And to give you an idea of just how fast things are moving, the R3 group decided the

EVERYTHING AS A SERVICE

Blockchain competition amongst the tech giants is growing rapidly. The days of making squillions from selling computer hardware to corporations are fading fast — these days, the big money comes from selling products as services, thanks mostly to distributed or ‘cloud’ computing. You may have already heard of ‘software as a service’ (SaaS), such as your Office 365 online subscription. But there’s also ‘infrastructure as a service’ (IaaS), where tech companies supply virtual hardware over the internet and care for enterprise-scale servers running many corporations.

But showing that you can seemingly make almost anything a service, Microsoft is now selling ‘ blockchain as a service’ (BaaS), offering to play host to blockchain ledgers not just for banking but for “businesses, industries and public organisations”. IBM and Amazon are also revving up their cloud computing reserves to deliver blockchain services. Meanwhile, chip giant Intel has announced its own distributed ledger technology codenamed ‘Sawtooth Lake’ in support of the Linux Foundation’s HyperLedger Project ( tinyurl.com/apc437-intel), of which Australia’s ANZ Bank is a member.

POTENTIAL JOB LOSSES

But even before blockchain technology has clocked on for its first shift, there is talk that the rise in new financial technology or ‘fintech’ could lead to significant job losses within the financial services sector. A report from Citigroup released at the end of March this year forecasts as many as 1.7 million jobs could be lost to disruptive technology changes within the industry in the US and Europe over the next 10 years — equating to 30% of the current industry workforce. Report author Ronit Ghose is quoted as saying that “the biggest take out [of jobs] will happen in countries that have been through a crisis or are tech savvy”. Those job losses are expected to come from the continued move from face-to-face to online banking, as well as implementing cost-cutting technology such as blockchain ( tinyurl.com/zkwjwrv). At time of writing, no-one had put a number on the potential job losses in Australia, although it would be unrealistic to think the local industry will be immune.